Busting Up the World’s Biggest IPO Could Cost China
Fintech companies like Jack Ma’s Ant need to be regulated, but if Beijing’s motives look questionable, the economy will suffer.
Was it something he said?
Photographer: Marlene Awaad/BloombergSome see China’s shock decision this week to quash the world’s biggest initial public offering as a simple case of authoritarian overreach — Communist functionaries slapping down an entrepreneur who’d grown too big for his boots. It’s a bit more complicated. President Xi Jinping and billionaire Jack Ma, founder of the fintech company Ant Group Co., should both draw lessons from this unfortunate collision.
On paper, the concerns that led Chinese regulators to suspend Ant’s $35 billion IPO just days before it was to happen aren’t unreasonable. The government has a role in maintaining financial stability and protecting retail investors. Though Ant acts like a financial institution, extending small loans to hundreds of millions of Chinese in conjunction with traditional banks, until now it hasn’t been regulated like one. Under new draft rules, the company would be required to back its loans with more capital. Regulators said this would affect the company’s business model and thus its pitch to investors.