In November, China’s biggest economic event was the shutdown of financial technology giant Ant Group on the eve of the country’s planned “largest-ever IPO”. The next various speculations have been, the consensus view is that the Chinese government heavy hand “crush” the ant listing plan, the purpose is to warn. I believe that Jack Ma’s Ant Financial Services IPO, although the scope is still the relationship between power and the market, but the background is the Chinese government’s concerns about regulatory capital in the era of big data, and may even miss the opportunity to turn the economy.
The P2P disaster is still there, the government’s residual fears still remain
The reason given by the SSE is that “your company does not meet the conditions for listing or information disclosure requirements due to “significant events such as changes in the financial technology regulatory environment”. This reason is half-true and half-virtuous, with the first sentence being true and the second sentence being false. But the real concern stems from the huge size of Ant Group’s IPO: “Ant Group’s total market capitalization may reach a staggering 2.1 trillion yuan ($313 billion), which was once said to be the largest IPO in history.
Comparing this IPO size with two figures, it is clear that the Chinese government’s concerns are not unfounded.
1、Only in the past seven years, large-scale private credit defaults have been occurring: In 2014, there were 261 platforms that collapsed, ran away and failed to withdraw money, and in 2015, there was the 50 billion yuan case of “E-rental”, with a cumulative total of more than 100 billion yuan.
2、According to incomplete statistics from domestic researchers, between 2015 and 2018, there were eight well-known mine-exploding platforms in China, causing losses of up to 133.7 billion yuan, involving 1.267 million investors (counting repeat investors).
These two types of events have created millions of financial refugees in China, resulting in an additional category of protesters for mass protests in China.
If you are still insensitive to the above data, let me cite two more figures for comparison: in 2019, China’s GDP is 99.0865 trillion yuan and the national general public budget revenue is 19.04 trillion yuan (narrow in the jargon) – Ant Financial’s fundraising is 2.1% of China’s total GDP, which is 11% of fiscal revenue, is 16 times the loss of P2P lending burst, this huge size of the IPO, so how can the Chinese government, which has placed the prevention of financial risk as a top priority over the years, rest assured?
Three Financial Risks the Chinese Government Is Trying to Prevent: Ant Financial Services
Jack Ma, a financial predator who has successfully avoided Xi Jinping’s recent purge of financial predators, has been navigating China’s business world with ease. At a time when China’s economy is in the doldrums and the international environment is facing great difficulties, Jack Ma, who once retired in order to protect himself, suddenly gave a speech at the Bund Financial Forum in Shanghai on October 26, saying, “We must change the pawnshop mentality of finance. This credit system is not based on IT and the society of acquaintances, but on big data, so that credit truly equals wealth. By “pawnshop mentality,” he means that while traditional finance requires collateral to make loans, digital finance uses big data to score credit and make loans directly. He also criticized that the “pawnshop mentality” of traditional finance “has harmed many entrepreneurs”.
Jack Ma’s remarks were obviously a paving the way for his Ant Financial Services IPO, which, of course, ended up being a disaster. Why did I say “of course”? It is clear what the policy focus of financial risk monitoring is after the “Six Stability” policy for China’s economy.
In August 2018, the Politburo meeting of the CPC Central Committee set the “Six Stability” policy – stable employment, stable finance, stable foreign trade, stable foreign investment, stable investment and stable expectations (economic growth target), and since then, it has been emphasized from time to time. The reason is clear: since “Made in China 2025” has become the key target of the US trade war with China, China has to return to the old path of credit expansion and government investment in order to cope with the outward migration of industrial chains, continuous economic decline, and increasing unemployment pressure.
One year later, the China Financial Supervision Report (2019) was published. The report consists of three main sections: “General Report”, “Sub-Reports” and “Special Studies”. The “General Report” is divided into two parts: the first part is “Models, Risks and Regulation of Financial Holding Companies in China”; the second part is “Financial Regulation in China: Review of Major Events in 2018”. It provides systematic summary, analysis and commentary on the major events of China’s financial regulation in 2018. The “Sub-Reports” are mainly annual regulatory reports by industry, which specifically analyze the annual progress of regulation of China’s banking, securities, insurance, trust and foreign exchange sectors in 2018, and outline a panoramic roadmap of China’s financial regulation. The “Special Studies” section is an in-depth analysis of current major issues in the field of financial regulation in China, mainly involving local financial regulation, regulatory sandbox system, private fund custody system, consumer data protection, Internet consumer finance, financial technology regulation and other aspects.
The e-commerce industry in which Jack Ma is engaged involves at least three aspects, such as consumer data protection, Internet consumer finance, and financial technology regulation, which can be said to be the key object of financial regulation.
Jack Ma, who has always been a man of fame and fortune, once called himself “Feng Qing Yang” to show that his heart yearned for this kind of realm where his heart was in the red dust, but he was able to make a difference at key moments. Why would he touch the red line of financial regulation at a time like this? What’s more, he announced his retirement as chairman of Alibaba back in September 2018. At the time, there was speculation that Ma was retiring in his prime: China’s private sector was facing its most challenging environment in years as financial and regulatory pressures intensified. Jack Ma’s retirement reinforced the sense that the private sector was losing momentum and confidence. What prompted him to speak out?
The Complex Motivation for Stepping Up to the Plate as a “White Glove”
There is speculation that the political backers behind him want to take advantage of the opportunity to make a profit and have him do something to promote the listing of Ant Group. I believe this factor exists, but who are the political forces behind him? On July 21, 2014, The New York Times published “The ‘Second Generation’ Winners Behind Alibaba’s IPO,” which noted that among the executives of the four Chinese companies that invested in Alibaba, there are the sons and grandsons of more than 20 members of the Politburo Standing Committee who have served since 2002. For example, Chen Yuan, son of Chen Yun, Wang Jun, son of Wang Zhen, Liu Lefei, son of Liu Yunshan, Jiang Zhicheng, grandson of Jiang Zemin, Wen Yunsong, son of Wen Jiabao, and He Jinlei, son of He Guoqiang. This relationship is no small feat and helps lock down deals that give companies an edge in China’s highly competitive business environment. This network of deep-rooted and intertwined interests is far more extensive than Wu Xiaohui’s, Wang Jianlin’s, or even Xiao Jianhua’s super white glove. This, coupled with his own ability to flex his muscles and take good stands at critical times, allowed him to ride out the storm when all of them were being liquidated to varying degrees.
But my reading of Jack Ma’s full speech at the Bund Financial Forum in Shanghai on October 26 suggests that, in addition to the above, he also has a unique (and perhaps vague) sense of what is going on in the world economy today. This year, the whole world is in a quandary due to epidemics, China-US bad blood, and the uncertainty of the US election – the EU is even counting on the return of the US to the Paris Climate Agreement after Biden comes to power. Jack Ma has an unusually sober judgment: “Over the past 16 years, Ant Financial has been focused on green, sustainable and inclusive development. If green, sustainable and inclusive finance is wrong, we (also) will be wrong again and again and again.” – This is effectively a denial of green, sustainable and inclusive finance. — this is effectively a repudiation of the green economy, a pseudo-innovative economic path that Europe and the national left are still dead set on.
Europe’s green energy path has become a heavy burden for consumers in Germany and some European countries. A number of studies have long pointed out that Germany’s abandonment of nuclear and fossil fuels, and the green power wave, was once held up as a model for the world. However, after a few years of implementation, the enormous costs and additional charges have overwhelmed consumers, leaving Germany’s green energy policy in a quandary and forcing a complete rethink of its industrial model. The plight of green energy companies, which have been cheating governments out of subsidies, tax exemptions, and other benefits in the name of environmental protection, has emerged in every country, and Jack Ma, who has dealt with various international organizations, is well aware of the pitfalls of the pseudo-innovative economic discourse of the “green economy”-which is supposed to be his way of building a new, more sustainable, and more sustainable world. One of the driving forces behind the financial system.
At present, the only country in the world that can be recognized (or dare not criticize) by other countries is China, which clearly adheres to a nationalistic position and prioritizes its own interests. Judging from Jack Ma’s speech, he is indeed not lacking in vision. But Ma’s difficulty is insurmountable: although China is a country with a close relationship between government and business (power and capital), the government that Ma is trying to persuade, especially under Xi Jinping, has very little trust in private capital, and only a little “trust” when it needs to be used. As a result, the Chinese government has succeeded in introducing high technology in the Internet era and has developed far superior surveillance technology and various left-field software technologies, but it remains to be seen whether it will be able to take advantage of the opportunity with capital again at this historical juncture in the world’s economic transformation.
Recent Comments