business

Ant Group IPO fiasco reflects battle for China's financial soul

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By Dan Martin and Beiyi Seow

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Xi Jinping keeps finding ways to make enemies. One wonders how many more razor sharp knives he can juggle before he starts dropping them and stabs himself.

3 ( +3 / -0 )

This story has got the nuance very well documented. Alipay has been trying to promote the idea Ant is not a bank for some times now, and most punters thought Ma would suceed (in sidelining regulators) given his CCP credentials and connections.

BUT, if it quacks like duck, walks like a duck, it is a duck. Ant lends, so of course it's a bank. Just because it operates online using technology, doesn't mean Ant is immune to risks.

IMO, if regulators didn't act on Ant, all other Chinese banks would follow suit to sidestep regulations. China would blow up to smithereens given the Chinese entrepreneurial AND risk taking culture.

2 ( +2 / -0 )

MO, if regulators didn't act on Ant, all other Chinese banks would follow suit to sidestep regulations. China would blow up to smithereens given the Chinese entrepreneurial AND risk taking culture.

Before Ant the Chinese used a form of small business crowdfunding that is word of mouth, person to person. A problem China has is that the big state run banks won't lend to small business. Small business in China is starved for investment capital. It all goes to the largest firms and especially to money losing State Owned Enterprises, SOEs. There are no SBA loans in China. Mom and pop shops can't get a loan from a big Chinese bank so small firms rely on word of mouth person to person lending by friends, friends of friends and their extended family. It is a completely unregulated shadow banking system. Incidentally you see this in Chinese communities abroad. China has been trying to stop these practices but with little success. Word of mouth, exchanges of cash with no paper trail other than maybe some handwritten notes hidden somewhere, figuring out who borrowed what from whom is impossible for the authorities. Nothing is guaranteed and people sometimes lose a lot of money this way. Since there is no legal recourse bad debts are often settled with physical violence. Ant was trying to tap into that market and lend money to these small businesses in an organized manner and makes some money in the process. If China was smart they would let them, with some regulation to prevent excessive debt.

0 ( +0 / -0 )

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