Abrupt Suspension Of Ant Group’s IPO

Ant Group’s highly anticipated US$39.5 billion IPO (Initial Public Offering), which was expected to be the world’s largest, was abruptly suspended just two days before its scheduled dual listing in Shanghai and Hong Kong on 5 November 2020. The key consideration behind the decision, according to a senior official from the People’s Bank of China, was to “safeguard the interests of consumers and investors” and “maintain a stable, healthy market development in the long term”. The People’s Bank of China is the central bank of China. To learn about the definition of central bank and its functions, you may sign up for economics tuition Singapore with a reputable economics tutor Singapore.

Tighter Regulation To Prevent Financial Risk

Chinese policymakers have recently stepped up efforts in tightening regulation in financial technology and online consumer lending to ensure financial stability in the world’s second largest economy and protect traditional lenders who are mainly government backed banks such as Industrial and Commercial Bank of China, Bank of China, China Construction Bank and the Agricultural Bank of China. Edmund Quek is widely regarded the best economics tutor Singapore. You may approach the economics tutor Singapore in economics tuition Singapore for more information about China’s big four banks. His economics tuition Singapore centre, Economics Cafe Learning Centre is conveniently located within five minutes’ walk from the Bishan MRT Station.

A subsidiary of Alibaba, Ant Group runs Alipay, one of China’s largest payment gateways alongside WeChat Pay, two lending arms Huabei and Jiebei, as well as credit rating services. Huabei and Jiebei offer to match the funding needs of countless consumers and small business owners with the financial resources of some 100 lenders. If successfully listed, the Ant Group would have grown its worth to a stunning US$359 billion, surpassing any other banks in the world, including JP Morgan, and Chinese government backed Industrial and Commercial Bank of China. With guidance from your economics tutor Singapore in your economics tuition Singapore class, discuss the implications Ant Group’s listing on other banks in China and beyond.

The new rule released by CBIRC (China Banking and Insurance Regulatory Commission) requires financial technology firms such as Ant Group to fork out 30 per cent of the loans while the banks provide the remaining 70 per cent. Under the current arrangement between Ant Group’s Huabei and Jiebei and their partnering banks, Ant Group only contributes about two per cent of the loans. You may consult your economics tutor Singapore in economics tuition Singapore the financial impact of this new rule by CBIRC on financial technology firms like Ant Group.

Financial Technology Firm’s Role

According to the People’s Bank of China, as of 30 September 2020, there were more than 7,000 microfinance firms in China and US$135 billion outstanding loans through these firms. Apart from Ant Group’s Huabei and Jiebei, other such firms include JD.com’s Jintiao and Baitiao, and WeBank’s Weilidai, among others. Coincidentally, JD.com is also planning an IPO in Shanghai. To find out more about JD.com’s IPO, please consult Mr Edmund Quek, principal economics tutor Singapore of Economics Cafe Learning Centre, a premier economics tuition Singapore centre in Bishan.

Privately owned small businesses in China have long faced difficulties in securing loans from government backed banks. As a result, some of these business owners have turned to shadow banking for alternative source of funding. The emergence of financial technology firms such as Ant Group bridged the small businesses’ funding gap. According to the People Bank of China, as of 30 June 2020, consumer loans through financial technology firms such as Ant Group amounted to US$216 billion.

Linda Geng

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