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Jack Ma’s stalled IPO is about more than Beijing saving face

November 12, 2020, 11:39 AM UTC

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When regulators squished Ant Group’s $37 billion initial public offering last week, many analysts interpreted the move as an effort by China’s thin-skinned Communist rulers to remind the nation’s best-known Internet billionaire who’s really boss.

Conventional wisdom had it that Jack Ma, Ant’s co-founder and largest shareholder, doomed the listing by shooting from the lip in an Oct. 24 speech to the Bund Financial Summit in Shanghai. Reuters reported that people close to Ma tried to get him to tone down the speech, and that “senior financial regulatory officials were furious at Ma’s criticism.”

Other accounts have suggested regulators scotched the listing, which would have been the largest IPO ever, in a fit of pique. In pulling the plug at the last minute, concluded the New York Times, China’s leaders were sending a clear message: “No private business gets to swagger unless the government is on board with it.”

Bloomberg‘s Shuli Ren argues the surprise suspension of Ant’s blockbuster offering proves China’s bureaucrats are “capricious” and “don’t know what they’re doing.”

Call this the “about face” thesis. It feels way too pat to me.

San Francisco-based Rui Ma, writing in the Tech Buzz Extra newsletter, makes the case that the cancelation of Ant’s IPO is part of a much broader regulatory campaign to curb the power of China’s tech giants—one that is long overdue, enjoys considerable support among financial professionals and China’s public, and has been in the works for many months.

That argument was bolstered Tuesday by an announcement that a Beijing regulator is drafting rules to prevent monopolistic behavior by Internet platforms including e-commerce giants Alibaba Group and, gaming and social media leader Tencent Holdings, and food delivery courier Meituan Dianping. The implications of that announcement, as they dawned on global investors, sent shares of China’s tech behemoths into a two-day tailspin—wiping out nearly $300 billion in market capital. (Tech stocks bounced back Thursday.)

As John Dong, a securities attorney at Joint-Win Partners in Shanghai told Bloomberg: “The Wild West era of policy arbitrage—taking advantage of weak regulations over the sector—has come to an end.”

At the Shanghai event, Ma, known for his love of mixing colorful metaphors, decried China’s banks for their “pawnshop mentality” and assailed the nation’s financial regulators as risk-averse fuddy-duddies who stifle innovation and slavishly emulate the Basel Accords—which Ma deemed overly complex rules designed for aging Western societies and unfit for developing nations like China.

“We cannot use the way to manage a railway station to manage an airport,” Ma declared. “We cannot use yesterday’s way to manage the future.”

Ma’s comments, to mix another metaphor, went over like a lead balloon. His audience included China’s most powerful bankers and regulators. The speech provoked outrage on social media. “It seems like Ma has become so egotistical that he thinks he’s above the laws now,” wrote one Weibo user.

Days later, representatives from China’s central bank and financial regulatory agencies summoned Ma, Ant’s executive chairman Eric Jing and chief executive Simon Hu to Beijing for a rare, unscheduled meeting.

The South China Morning Post (owned by Alibaba) reports that bureaucrats told Ant executives that they viewed financial stability as a higher priority than expanding credit, and were about to introduce a raft of new rules that would completely transform the business landscape for financial technology companies.

Authorities advised Ant executives they would need months to assess and figure out how to comply with the new rules. The Shanghai Stock Exchange canceled Ant’s IPO in Shanghai the next day.

Ant dominates China’s fintech sector. The 16-year-old company’s Alipay app is used by more than 730 million people every month and offers personal credit, loans, investments and insurance. Ant has become China’s largest online credit services provider to consumers and small business owners, and connects borrowers and about 100 banks. But it has had numerous run-ins with regulators over the years, and banks complain Ant has been exempt from the rules that constrain traditional lenders.

One of the key provisions in the draft rules requires micro-lenders to fund at least 30% of any loan they fund jointly with banks. Only 2% of the loans Ant currently facilitates show up on its balance sheet.

Tech Buzz China‘s Rui Ma argues that Jack Ma and other senior executives at Ant are too savvy and too well-connected politically not to have known that Beijing was readying stricter fintech regulations that would complicate Ant’s IPO. She wonders whether his Shanghai speech was “made out of desperation, a last ditch attempt to sway public opinion which failed.”

Instead, he may have accelerated the inevitable.

Hong Kong and Singapore announced this week that they have agreed on a “travel bubble” allowing up to 200 passengers a day to travel between the two financial hubs without being subject to strict quarantine rules. How long before the rest of Asia opens to cross-border travel? And will it be safe? Join Grady and me Thursday, Dec. 3 at 9 p.m. Beijing time for “On the Road Again,” a virtual conversation to ponder “The Future of Post-Pandemic Travel.” We’ll talk with special guests CEO Jane Sun, Singapore Tourism Board Chief Executive Keith Tan, and McKinsey & Co. Partner Steve Saxon, who’ll take your questions. You can register for the call and find out more here.

More Eastworld news below!

Clay Chandler

This edition of Eastworld was curated and produced by Grady McGregor. Reach him at

Eastworld news

Trials and tribulations

Chinese vaccine maker Sinovac has resumed phase III clinical trials for its CoronaVac vaccine in Brazil. Anvisa, Brazil’s health regulator, announced the suspension of Sinovac’s testing earlier this week due to a "serious adverse event." Sinovac’s Brazilian partner, the Butantan Institute, criticized Anvisa, claiming that the "event" was a volunteer death that was unrelated to Sinovac’s trials. The trial delay is the latest instance of Sinovac getting caught up in domestic politics: Brazil’s president and most powerful governor have traded barbs over whether Brazil should purchase Sinovac’s vaccine. Fortune

Hong Kong crackdown

Hong Kong’s legislature no longer has opposition lawmakers. On Wednesday, Hong Kong’s government disqualified four pro-democracy lawmakers under provisions of Beijing’s new national security law. Hours later, the remaining 15 pro-democracy lawmakers resigned in protest, leaving only pro-Beijing lawmakers in the body. U.S. National Security Advisor Robert O’Brien condemned the initial ousting of the four lawmakers. The pro-democracy lawmakers said the disqualifications would essentially turn Hong Kong's government into a rubber stamp for Beijing's policies. On Wednesday, Beijing condemned the mass resignations as a blatant challenge to Beijing's authority over Hong Kong. Hong Kong Free Press

Speeding ahead

China is beating the U.S. in 5G technology; the contest is not particularly close. The U.S. has rolled out 5G-enabled smartphones and 5G networks in some urban areas, but China’s 5G infrastructure is far more advanced. By the end of 2020, China may have close to 700,000 5G base stations compared to 50,000 in the U.S. Right now, China’s 5G advantage may only amount to faster phone speeds, but in the future China may have the upper hand in a wide range of 5G-enabled applications like self-driving cars, remote surgeries, and automated factory floors. Wall Street Journal

Broken tooth

In the 1990s, Wan Kuok-Koi, also known as Broken Tooth, was one of Macau’s most powerful and ruthless mob bosses. Now he has recast himself into an international businessman, leading investment projects outside of China as part of Beijing’s Belt and Road Initiative (BRI). The BRI is President Xi Jinping's signature foreign policy initiative and has sparked numerous investment and development projects around the world. Kuok-Koi has now launched a number of questionable new BRI investment projects, showcasing that the initiative has created opportunities for shadier business interests to grab a piece of the pie. The Wire China

Forgotten but not gone

TikTok, the video-streaming app owned by China's ByteDance, applied to delay the U.S.'s TikTok ban by another 30 days after the app claimed that the Trump administration hadn't engaged with TikTok's lawyers in weeks. The TikTok ban, which would require TikTok to divest from its American operations, is set to go into effect on Thursday. In September, TikTok made a tentative agreement with U.S. companies Oracle and Walmart to sell a portion of its U.S. operations in order to remain viable in the U.S. The Trump administration has not indicated whether it would approve the deal. CNN

Coronavirus by country


Australia has been largely successful in stamping out COVID-19 by sealing off its borders to most travelers and deploying restrictive lockdown measures. Australia still has some social distancing restrictions in place, but the country’s economy has reopened as new cases have slowed to just a handful per day. One containment tactic is a limit on returning citizens; Australia allows just 6,000 citizens to return from abroad each week and caps the number of passengers on each international flight at 30. Australia says the restrictions are necessary to not overwhelm quarantine facilities, but critics argue that the measures violate United Nations’ human rights principles for the 36,000 Australians who are currently stranded overseas. The UN human rights treaty says that countries should guarantee the rights of citizens to return home. Sydney Morning Herald

Markets and movers

Apple – The U.S. smartphone maker has suspended Taiwanese iPhone assembler Pegatron after Apple discovered that Pegatron concealed labor violations among student laborers at its factories in China. New York Times

Huawei – The Chinese telecoms manufacturer plans to sell its budget-brand smartphone business Honor for roughly $15 billion to a consortium led by the Chinese tech company Digital China and the government of Shenzhen. Reuters

Serum Institute – India's largest vaccine maker announced this week that it has produced 40 million doses of AstraZeneca's vaccine candidate. Developed in partnership with Oxford University, AstraZeneca is currently testing its vaccine in phase III clinical trials. Reuters 

Piramal Glass — The U.S. private equity giant Blackstone is set to acquire the glass unit of Indian Conglomerate Piramal Enterprises for $1 billion. Bloomberg

Woodside Petroleum — Australian largest natural gas producer has shelved talks to sell stakes in a natural gas project to Chinese investors amid rising tensions between China and Australia, Woodside's CEO Peter Coleman said on Thursday. Reuters

Final figure

40 million

Southeast Asia’s six largest economies have added 40 million Internet users amid the pandemic, according to a new report from Google, Bain & Company, and Temasek. The figure marks a rapid rise in online users; the region added roughly 25 million new Internet users each year between 2015 and 2019. The e-Conomy SEA report says that 70% of people in Vietnam, Thailand, the Philippines, Malaysia, Singapore, and Indonesia are now online. The region’s Internet economy is now valued at roughly $100 billion, and, based on current growth models, the report estimates that number may triple to $300 billion by 2025. The Diplomat