The Ant Financial IPO Is Xi Jinping's Latest Battle With Big Business

Chinese Premier Xi Jinping personally made the decision to block Ant Group's IPO two weeks ago, according to The Wall Street Journal. The Chinese fintech's public listing of $37 billion was set to be the largest in history. 

The decision was made after majority shareholder Jack Ma's scathing criticism of the government's tough financial regulations. Ma had told a summit in Shanghai on Oct. 24 that the regulatory system was stifling innovation and must be reformed to fuel growth.

Xi Jinping was reportedly furious after reading the government reports on the matter, according to officials, and ordered Chinese regulators to investigate and effectively shut down Ant's stock market flotation.

Soon after the orders, state regulators started compiling reports on how Ant had used digital financial products like Huabei, a virtual credit card service, to encourage poor and young people to build up debt.

The reports ultimately led to the suspension of the public offering deal on Nov. 3. Investors around the world had already committed to paying more than $34 billion for Ant’s shares.

New draft rules will also target Ant's fast-growing online lending business. According to Bloomberg, the suspension is just the beginning of a renewed campaign by China to rein in the fintech empire controlled by Jack Ma. The China Banking and Insurance Regulatory Commission plans to discourage lenders from using Ant’s platforms.

Ant group is confident that banks will keep using their platform. "Ant will continue to support bank partners to make independent credit decisions and leverage Ant’s technology platforms to serve consumers and small businesses," Ant said in response to a question by Bloomberg.

The problems between wealthy entrepreneurs' growing influence in China and the state is not new.

Ever since taking office in 2012, Xi has not been a fan of the ascendance of big private businesses that rack up wealth and power in the country, as they are seen as posing a challenge to his authority.

The government has taken action against some of the country’s highest-profile private companies. Dalian Wanda Group’s Wang Jianlin, and Wu Xiaohui of Anbang Insurance Group, are among the prominent entrepreneurs who faced government crackdowns.

The latest saga is set to have an added financial burden on China, a country that is already dealing with the adverse economic impacts of the pandemic.