Opinion piece from The New York Times / April 28:
Ant made digital payments and banking products available to a wide segment of the country’s population, aiding anti-poverty efforts. The Alipay app has over 700 million monthly users, including residents of remote rural areas. Ant has financed some 29 million small businesses, including street vendors.
Perhaps Mr. Ma believed he need not look over his shoulder. After all, for many years, China tacitly tolerated underground financial institutions subject to fewer regulations and less supervision than traditional commercial banks. These outfits, known as shadow banks, offered higher interest rates to depositors and provided credit to riskier borrowers, including small-scale entrepreneurs the government-backed banks ignored. (Eventually, the government clamped down on this sector once it became too risky: rising loan defaults and bank failures meant depositors could lose their savings.)
Ant took advantage of the government’s passive approach to regulating fintech companies, developing a wide range of financial products and services catering to a growing middle class. Mr. Ma used his influence and political power to shield his company from regulatory oversight, even refusing to share its trove of consumer data with the government.
Financial regulators fretted about how Alipay, along with a rival, WeChat Pay, swiftly dominated digital payments, deterring new entrants. Indeed, this has spurred a government project to develop a digital version of China’s currency as an option for digital payments. Ant, they feared, was also harvesting data on its users to judge their creditworthiness and offer them loans on better terms than state-owned banks.
Meanwhile, it could hide any risks from these loans by shuffling its revenues and losses across different arms of its conglomerate. Even while it expanded, as a fintech company Ant could dodge the stringent regulations banks are subject to. In effect, it could become too big to fail.
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.
For the full article: 'Jack Ma Taunted China. Then Came His Fall'
https://www.nytimes.com/2021/04/28/opinion/jack-ma-china-ant.html
