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Ant's new company is the first step of a forced restructuring after China yanked its IPO.
Chinese regulators had grown concerned over the tech company operating like a bank.
The new consumer finance firm will have state-owned shareholders and will issue personal loans.
Jack Ma's Ant Group has been approved to run a consumer finance company, the China Banking and Insurance Regulatory Commission said Thursday.
It's the first step of Ant's forced restructuring after China yanked its $35 billion IPO in October 2020. It also means the company will be regulated more like a traditional financial entity, giving authorities more oversight over
Ant's consumer finance firm will be called Chongqing Ant Consumer Finance. It will issue personal loans, financial bonds, accept deposits, and borrow from Chinese financial institutions, among other things. Ant's Huabei and Jiebei credit arms, which previously offered the loans that Ant issued, will also fall under this new company along with its online lending operations.
Ant's company will also now be held by six outside shareholders, in addition to the 50% stake that Ant will retain. Two other entities are state-owned banks - Nanyang Commercial Bank will hold a 15% stake, and China Huarong Asset Management will own about 5% of the company. Cathay United Bank will also hold a 10% share.
An Ant Group spokesperson told Insider: "Under the guidance of regulators, Ant will work with other shareholders of Chongqing Ant Consumer Finance Co., Ltd. to serve the needs of consumers, and to continue enhancing the quality of financial services and risk management capabilities."
Ant's massive online lending business has been one of its most lucrative areas, but it landed the company in hot water over concerns that the financial technology giant was operating too much like a bank. Regulators were also concerned about Ant biting into the business of some Chinese banks and siphoning off millions of customers.
The situation escalated when Ma publicly criticized China's lending methods and financial system at a conference in late October 2020. Ant was poised to go public, but Chinese authorities stepped in and pulled the IPO. Reports later surfaced that Chinese President Xi Jinping personally instructed authorities to look into Ant following Ma's comments.
The company was then ordered to restructure its business and "return to its payment origins."
China's homegrown tech companies have largely enjoyed little regulatory oversight. But Ant's pulled IPO and anticompetitive behavior guidelines issued for internet firms like Ma's Alibaba - as well as the $2.8 billion fine that China levied against the company - signal that the Party is cracking down on the industry.
Read the original article on Business Insider