I am posting this article because I can not help but feel how precariously balanced things are with our ownership and the Chinese Government.
Jack Ma Taunted China. Then Came His Fall:
https://www.nytimes.com/2021/04/28/...l?action=click&module=Opinion&pgtype=Homepage
Ant Group, China’s biggest fintech conglomerate, was preparing last November for its initial public offering. Analysts projected it would raise $34 billion, the largest sale of shares in history. The company, founded by Jack Ma, had become synonymous with financial innovations, which are often risky.
In the run-up to the I.P.O., Chinese regulators trying to assess financial risks on Ant’s books had been brushed off by Mr. Ma. In an audacious speech, he criticized regulators as too cautious and pilloried state-owned banks for their “pawnshop” mentality of providing loans only to borrowers who could post collateral.
Even oblique attacks on China’s government rarely go unpunished. This was a direct provocation. Yet such was Mr. Ma’s aura, and his apparent imperviousness to government strictures, that domestic and foreign investors were unconcerned. They salivated at the prospect of buying shares of Ant — it was, after all, a politically powerful behemoth and indispensable to the economy. Its Alipay platform, which pioneered remarkably cheap and efficient payment technologies, has revolutionized China’s financial system. Other arms of the conglomerate provide consumer credit and small-business loans online within minutes.
Then it all fell apart. Two days before Ant’s shares were to begin trading on the Hong Kong and Shanghai exchanges, the government blocked the I.P.O. Regulators cited the company’s opaque accounting practices, which, they said, could be hiding huge amounts of risky loans. Given Ant’s sheer size, they noted, any problems could roil financial markets and hurt investors.
Thanks to his misstep in openly criticizing the government, regulators have Mr. Ma right where they want him, and intend to make him relinquish control of his empire.
But the government isn’t done. This month, regulators forced Ant to produce a “rectification plan” to restructure the company by separating out its different entities, which include insurance and wealth management services. It had to commit to increasing transparency and improving its accounting and consumer protection practices, in addition to limiting its expansion into new lines of business. It seemed that, in bringing the hammer down on the company, the government aimed to limit its growing economic and political power.
But in so doing, the government spooked investors. Suddenly, President Xi Jinping’s pledges to encourage private enterprise and innovation looked like mere lip service.
The Ant episode seemed to signal an end to China’s era of innovation in fintech. But more broadly, it appeared to mark the cancellation of its experiment in financial-market liberalization and the return to government intervention and a hostile environment for investors. Yet however heavy-handed Beijing’s moves may be, they suggest that it aims to control financial risks, even if the process for doing so looks chaotic.
The episode does send a strong signal about the limits of Beijing’s tolerance of free enterprise. Firms can innovate and grow big but will meet swift retribution if they challenge government policies.
For fintech firms in China, Ant’s forced restructuring will serve as a template. Competitors like Tencent have been put on notice: Be transparent, comply with regulations, protect consumer data — or else. (China’s government knows only too well how extensive data gathering confers power.) While the government tolerates private enterprise and encourages innovation, entrepreneurs should think twice before voicing overt defiance of the government.
Liberalizing China’s financial system is well and good, but the simultaneous desire to exert government control will hardly encourage innovation or efficiency. Even Beijing, despite its remarkable economic record, will find it difficult to have it all.