After Anthem’s big touchdown in mainland China, Ma has made only two public appearances, one at a school he supports in Hainan Province and the other at an online conference of the Russian Geographical Society. Many commentators have suggested that Ma might be in for a soft landing. But in reality, from all indications, the situation may be far less optimistic and may be worse than imagined.
From April 23 to April 27, Ma and Alibaba and Ant Group’s unfavorable news came out intensively. on April 23, foreign media disclosed that the Communist Party’s central bank plotted to control Ant Group’s loan data. on April 25, the Communist Party’s central bank signed a strategic cooperation agreement with Ant Group, which handed over its self-developed distributed database OceanBase and mobile development platform mPaaS. on April 27, the Bloomberg Research reports that Ant Group’s valuation is threatened to plummet by more than 90%; foreign media disclosed that Xi Jinping authorities are investigating the inside story of Ant Group’s IPO getting fast-tracked approval.
In the latest news, the Wall Street Journal reported on April 27 that Beijing authorities are investigating how Jack Ma obtained fast-track approval for his Ant Group IPO last year, according to people familiar with the matter, suggesting that Beijing’s crackdown on the tech billionaire is spilling over to state authorities.
The investigation, which authorities are launching in early 2021, will focus on regulators who approved the IPO deal and local officials who championed it, including large state-owned enterprises that could benefit from it, the report said. The investigation examined Ma’s ties to these state stalwarts, people familiar with the matter said.
The investigation means the future of Ant Group and its controlling shareholder Jack Ma still faces uncertainty. The usually high-profile entrepreneur has kept a low profile since the IPO was called off at the last minute in November 2020. Ma will not be allowed to leave China until Ant Group completes the business overhaul required by regulators and this government investigation is over, people familiar with the matter said. His private jet, which has been pretty empty for the past six months or so, spends most of its time parked on an airport in Hainan.
As you know, Ma attended the Pudong Financial Summit forum in late October last year and lambasted the Communist Party’s financial regulatory authorities, followed by the emergency halt of the Ant Financial listing, highlighting that something is wrong with him. Ma has not been seen in public for a long time, arousing suspicion that he has been “disappeared”. According to previously informed Communist Party officials, Ma’s public attacks on financial regulatory policies angered the leadership, in this case of course Wang Qishan and his financial gang, and then Chinese President Xi Jinping even personally intervened to halt Ant Group’s IPO plans.
According to a report in the Wall Street Journal, one of the focal points of the authorities’ investigation is the Shanghai Stock Exchange’s science and technology board. Last year, Jack Ma had planned for Ant Group to list on both the STB and the Hong Kong Stock Exchange. In mid-2020, local securities regulators in Zhejiang spent about a week reviewing Ant Group’s IPO plans and making recommendations, the report said. on Aug. 25, Ant Group filed a prospectus for listing on the KSE and the Hong Kong exchange. Less than a month later, Shanghai regulators completed their review of its listing application, allowing Ant Group to plug companies that had applied for listing much earlier.
Anyone familiar with the mainland’s officialdom knows that this is a high-velocity job, faster than a hypersonic missile.
The investigation also examined a range of state funds, including massive sovereign wealth fund China Investment Corp. (CIC) and China Life Insurance Co. (601628.SH, for short), including China Life Insurance Co. (China Life), China’s largest state-owned insurance company, invested in Ant Group. For example, why would CIC invest in Ant, a domestic company whose mission is to invest overseas rather than domestically?
On April 27, Bloomberg reported that a new research report released by Bloomberg industry research analyst Francis Chan said that the Chinese Communist Party’s regulatory constraints threaten to pull Ant Group’s revenue growth down to a 10 percent range from 30 percent in November 2020, thus dragging down earnings prospects.
Francis Chen pointed out that Ant Group’s valuation could fall to between $29 billion and $115 billion, from the previous $320 billion. Ant Group’s valuation will probably be similar to that of banks and other mainstream financial institutions. Ant Group is facing constraints in online lending, payments, wealth management, insurance and other aspects.
That said, the valuation of the company, which once had the potential to record the world’s largest IPO, is now down by a minimum of two-thirds and a maximum of 90 percent.
Francis Chan said Ma currently holds a controlling stake in Ant Group, and with or without Ma, “Ant Group, the Chinese fintech giant, could see its greatness decline in the future.”
According to Interface News, on April 25, the Communist Party of China’s central bank has signed a strategic cooperation agreement with Ant Group, which handed over its self-developed distributed database OceanBase and mobile development platform mPaaS to assist the central bank in promoting the construction of a technology platform for the digital yuan.
Sources from Ant Group said that digital RMB pilots have already been conducted at RT-Mart, Tmall Supermarket, Haro Bicycle, Shanghai Public Transport and other venues. Meanwhile, during the upcoming 2nd May 5th Shopping Festival in Shanghai, in addition to the six major state-owned banks, Netshang Bank, which was initiated by Ant Group, will also conduct a digital RMB pilot.
According to the Free Times, the Chinese Communist government has been strangling and suppressing Ant Group with the aim of nationalizing it. In addition to asking Jack Ma to clear out his shareholding and quit Ant Group, there are also rumors that it is trying to take control of Ant Group’s valuable consumer credit data. The company is now asking Ant to hand over its database and technology, and Ant Group is afraid of becoming a “central enterprise”.
The Financial Times reported on April 23 that people familiar with the matter said the Communist Party’s central bank has asked Ant Group to hand over its data to a Communist Party-controlled credit scoring company, and that the new company will be managed by a former Communist Party central bank executive.
The company will also serve other financial institutions that are rivals to Ant Group in the lending business, such as China’s state-owned banks, the report said.
Ant Group insisted on leading the new company, the sources said, adding, “Too much government intervention will bring the industry to its knees.”
The Communist Party’s central bank argued that Ant Group’s request would create a conflict of interest with the Communist Party’s state-owned financial institutions, people familiar with the matter said. A former Communist Party central bank executive said, “There is no doubt that the credit data of the Ant Group is of great value to the banks.”
The words of this official, as quoted in the Financial Times, I think are the biggest reason for the current dilemma that Ant Financial, or Jack Ma, is facing.
So the problem with Jack Ma and Ant Financial is not a problem of monopoly, but a problem of conflict of interest, or a problem of conflict of interest with the financial institutions of the Chinese Communist Party, a problem of conflict of interest with the People’s Bank of China, fundamentally, a problem of conflict of interest with the Chinese Communist Party. When the problem reaches this level, Ma is afraid that he will be in a bad way.
Previously, it was thought that Ma got into trouble because he loudmouthed himself and criticized the CCP’s financial regulator at the Pudong Forum, slapping Wang Qishan in the face. But now we can slowly taste more, that is, sooner or later, Ma Yun will have a big accident, and it seems to be an inevitable process to break the bones.
To put it simply, Beijing does not want a competitive market, so anti-monopoly and financial risks are the reason but also the excuse, Beijing wants its own full monopoly control, and their “most advanced” and crucial tool is the digital yuan. The digital renminbi is not just blockchain technology, it includes a series of circulation, prosecution and supervision tools, which requires mastering almost all data, especially financial-related data. Because only by mastering this data can it be automated with AI artificial intelligence. This set is the means and methods of the CCP’s current approach to the Internet on the mainland, which is what Xi Jinping called “modernization of government governance” in his 19th National Congress.
Chen Yun, a contemporary of Deng Xiaoping, once defined a “market economy with Chinese characteristics” as a “birdcage economy”. That is, the government is a cage, the market economy, especially the main body of the market economy, that is, enterprises, are the birds in it. Although the Chinese Communist Party has not mentioned the birdcage economy for many years, in fact, the authorities have been implementing the “birdcage economy”.
The problem now is that after the rise of the Internet economy, the bird cage in the past was not big enough, so the CCP released these birds from the cage to grow, but tied a string to their feet, and then the CCP expanded the cage. When the cage got bigger and bigger, all the birds had to be caught back inside the cage. Of course, some birds don’t want to and break the thread and run away, but some birds can’t run away and have to go back into the cage obediently.
Ma Yun is the bird that must go back inside the cage.
But the problem is that there is a reason to bring Ma back, otherwise many other birds outside the cage will be scared away. I think this is exactly why the Chinese Communist Party is now starting a massive investigation into how Ant Financial’s IPO was able to proceed at a “supersonic” pace. As you can probably imagine, as the largest valued company in mainland China, as one of the fastest growing and richest companies in the world over the past two decades, there is no way to operate in mainland China without all sorts of close cooperation and ties with officials. This connection is not through official formal procedures, nor can it be, but is necessarily linked to officials.
Because Alibaba, Taobao, and Ant Financial Services are all growing very quickly outside the framework of China’s previous institutional governance. So these companies are bound to make exceptions, and all exceptions, legally speaking, are probably illegal. That is why some people say that China’s reform in the past thirty years is the process of breaking the law and breaking the system, that is to say, going back twenty years, everyone is illegal, it only depends on whether those who are in power pursue it or not. Having said that, do you think that Ma Yun has an extremely sinister outlook.
He went to sue Taobao and was received, of course, by the Zhejiang police, who eventually forced him to flee to the United States. To be honest, this entrepreneur has quite a background, according to his words, he used to feel that he could not do anything in mainland China, but it was Ma Yun’s Taobao that made him lose all his money. Because Ma Yun is not a person fighting, he has a large number of officials behind him, there are a large number of local governments, there are a large number of princelings, the second generation of officials. This is the reason why Ma is so proud of the mainland and does not even put Wang Qishan in his eyes.
So, the Chinese Communist authorities are now investigating these officials and local governments. Taobao, Ant Financial Services and local governments and government officials have more and more foul play than Huarong, I dare say. Lai Xiaomin of Huarong was executed for corruption. Ma Yun is not a government official, Ali, Taobao and Ant Financial are not central enterprises, so Ma Yun may not be as bad off, but there is no way he can get away with all the problems of illegal money and power deals.
To put things in perspective, the financial struggle between the Chinese Communist Party and the U.S. dollar requires digital RMB, digital RMB requires data from Ant, and grabbing this data requires full control of Ant Financial Services, and full control of Ant Financial Services requires Ma Yun to be “criticized and stinky”. This logic chain determines that Ma’s prospects are extremely gray.
At this time, Ant even proposed “government control is not conducive to development”, is simply to add fuel to the fire. “If the enemy does not surrender, let him perish.” Ma Yun was born before the Cultural Revolution, in any case, should still remember some Cultural Revolution slogans it. Replace the “enemy” with anyone’s name, in fact, it is just a matter of raising your hand.
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