Chinese regulators impose fines on Ant Group and Tenpay

China’s financial regulators imposed large fines on several fintech companies including Ant Group and Tenpay, sending a signal that they are winding up a years-long overhaul of online platforms.

Regulators fined Ant Group and its subsidiaries 7.1 billion yuan ($984 million), the People’s Bank of China, China Securities Regulatory Commission and the National Financial Regulatory Administration said in a joint statement on July 7.

The fine was related to violations of laws and regulations in areas such as corporate governance, financial consumer protection, anti-money laundering and payment and settlement.

Ant Group is the fintech affiliate of the e-commerce giant Alibaba and runs Alipay, the largest mobile payment app in China. Authorities ordered Ant Group to end its operations of the “Xiang Hu Bao” mutual aid platform – an online crowdfunding platform that helps members pay medical bills – and compensate consumers. The firm closed the platform in January 2022.

A day after the regulators’ announcement, Ant Group said it plans to buy back up to 7.6% of its shares from investors. The company said the repurchased shares will be transferred into Ant Group’s employee incentive plans to attract talent, while the plan will also give investors a liquidity option.

The share buyback plan values Ant Group at 567.1 billion yuan, around 70% less than the company’s valuation when it tried to list in Hong Kong and Shanghai in 2020.

Meanwhile, Tenpay, a subsidiary of Tencent, received fines of around 3 billion yuan, according to the company’s filing. The online payment platform, Alipay’s main rival, was fined over breaches of regulations relating to payment services provision.

Regulators have also recently imposed fines on the Postal Savings Bank of China, Ping An Bank and PICC Property and Casualty Company, the PBoC said.

It hinted the fines may mark the end of investigations into the sector. “At present, most of the outstanding problems in the financial business of platform enterprises have been rectified,” the central bank said.

It said regulators’ work priorities have shifted from promoting “centralised rectification” of the financial business of platform companies to “normalised supervision”.

Financial regulators would aim to improve the regulatory standards of platform businesses, bring different financial activities under the scope of regulation and promote the healthy development of the platform economy, the statement said.

Crackdown 

The Chinese government began overhauling the internet sector in 2020.

In November 2020, regulators abruptly blocked the $37 billion dual listing by Ant Group in Shanghai and Hong Kong, citing compliance issues. It came after the group’s founder, Jack Ma, criticised China’s financial sector reforms.

Since then, the PBoC has been driving the restructuring of Ant Group. In November 2021, the central bank approved Ant’s application to launch a personal credit-scoring joint venture with other companies, including state-backed partners.

The PBoC also accepted Ant Group’s request to set up a financial holding company in June last year, according to Reuters. This would subject the firm to rules and capital requirements like those for banks.

In 2021, financial regulators also fined Alibaba a record $2.8 billion and food delivery platform Meituan $530 million for abusing their dominant market positions.

Last year, authorities took aim at ride-hailing company Didi Global, forcing it to delist in New York. The Cyberspace Administration of China fined the company $1.2 billion in July for breaking data security laws.

End to the overhaul?

In January, China’s former banking regulator approved Ant Group’s request to more than double its registered capital, a sign that regulators may be loosening their grip on the company. Then-PBoC party chief Guo Shuqing said the same month that regulators’ clampdown on the 14 internet companies were “basically complete”. He made the comment as Ant Group announced Ma would relinquish control of the company.

The turnaround comes as Chinese policy-makers are grappling with a slowing economy, mounting deflationary risks, a sluggish property sector and frayed relations with the US.

Alibaba’s Hong Kong-listed shares rose 3% on July 10, the first trading day after authorities imposed a fine on its affiliate. Shares in Tencent gained around 0.7%.