> Ant Group has recently reported to China’s securities regulator about the significantly changes in regulatory environment, the exchange said, and this major development might make Ant Group fall short of the listing requirement regarding information disclosure
What does this mean? Does this sentence even say anything?
China just put out a new set of regulation that will severely dampen the leverage available to Ant, and thus dampen their revenue and profit significantly. That will in turn lead to significant downvaluing of its stocks.
So, the next step for the Chinese regulators is to suspend the whole thing for the dust to settle.
IPO at its relative late stage with a gigantic valuation, leaving little for retail investors to gain from. And its whole IPO process is preferential treatment at its finest, almost looked like Jack Ma can do whatever he wanted.
Ant and Ma's condescending posture did draw a fairly big backlash, it's certain pratices border on non-compliance, and Ma's beneficiaries are mostly from the last leadership, these probably helped put a brake on it.
Americans markets have been booming for the past 10 years, relatively robust and "policed", it also has something to do with the dollar dominance, so they kind of can take these bets?
But it's not the case for Chinese domestic markets.
> The IPO was a sensational draw for China’s retail investors who bid a record $3 trillion, equivalent to the entire annual economic output, for shares in the fintech giant.
I don't know the details of the situation so I'd be happy to hear from someone who knows more, but this deal could've been a huge win for Chinese financial markets. Down the road, unexpected government action like this could hurt investor confidence and depress the amount of money Chinese companies will be able to raise from foreign investors.
Its gigantic valuation most likely will face a harsh test, one that the fragile domestic market can hardly afford, a risk that worries the administration who has been desperately propping it up that also hopes it can fund China's tech self-reliance. Such listings didn't bode well in the past, with SMIC being the lastest example.
At its core, Ant is more of a lending company, re-distributing money it got from banks at much higher interest rates (typically 15%, some banks offer personal credit loans at around 4%) and leverage. Tho it insists on it's high-tech, in order to boost valuation and avoid financial regulation, but how many more debt can the population pile on itself?
Sidenote: Its business model profits from people that traditional banks snubed, mostly from lower social classes.
In India, we called them moneylenders and it carries a jail term to engage in such activities. Good to see Wall Street and the West lap up such usurious companies.
You probably think US trying to regulate big tech is also self shooting?
It's not, a healthy market need to curtail monopolies. Granted, it's no longer early 20th century and you can't just break them up like Standard Oil because that doesn't make any sense, but regulations are sorely needed across the pond.
In Ant's case, it is the unexpected nature of the action and lack of transparency that I see as damaging. Not necessarily the action itself. I'm still trying to learn what is going on and why, I haven't made a judgement on the action itself.
Indulged in the picture of financial boom, yet forgot the havoc raged by the greed? Modern financial is rarely useful for society. Even the VC community largely becomes rent seekers who monopolize new entrepreneurs, instead of really taking high impact long term bet.
Jack Ma appears mixing modern tech with his own idea about the financial system. Watching his onstage chat with Elon Musk and WAI 2020 shows that he is not interested so much of using tech to innovate, and his true interests might be in using tech to manage and control. Not too surprising for a tech baron raised in a totalitarian country.
There's a regulatory draft that requires small business lenders like Ant to warehouse 30% of the loans they originate vs the 2% that they currently have on balance sheet. This draft was disclosed after regulators met with Jack Ma and other Ant executives. No clue why this was only done now but this significantly changes valuations.
The timing makes sense if it is in response to his recent remarks but the regulation is extremely punitive vs potential outcome if this IPO gets botched.
I don’t think it is punitive. Ant primarily lends to individuals without any collateral. Those are inherently high risk debts and thus needs more safeguards.
This is a little different than what Lehman got in trouble for in the US.
During the financial crisis, the core issue is that banks were making loans off their own balance sheet with reserves too small to cover the losses that eventually occurred. In other words, when borrowers defaulted the bank itself lost money. This made them insolvent and caused the whole collapse.
In the case of Ant on the other hand, they essentially function as a lead generation platform for banks - currently 98% of "their loans" aren't really theirs at all, but rather are funded by their partner banks; if the loan defaults, it's the partner bank's problem, not Ant's.
The reason this change is such a big deal is that forcing Ant to fund 30% of its own loans will require raising an absolutely enormous amount of fairly expensive capital, driving up costs and significantly decreasing the value of the company.
Why would partner banks accept trash loans without doing due diligence? Though thinking about the housing crisis, greedy short-sightedness comes to mind. It's amazing how some of the people who claim to be the smartest with money are actually the dumbest and riskiest. Are they actually smart or just lucky they won a bet?
Governments have a history of bailing out the financial system. Lenders take that into account and will take on riskier loans since they effectively have a put on them.
It's not, the banks lend their excessive cash to a big tech company, Ant then use that money to make small/short-term loans with "big data" credit ratings to individuals unqualified for low-interest bank loans.
To expand on your comment here’s a good article that explains Ant and how it’s structured plus it’s issues with Chinese regulators by an excellent Chinawatcher.
Subscribed! I don't run into many people in the west that can have a nuanced view on what's happening in China and the place is just way too big and vibrant to deflect every topic into what's happening in one city or waaay on the other side of the Gobi desert. This doesn't happen on any other topic about any other country, and the other things going on are of keen interest to me.
I don't think 30% is unreasonable, nor would it require them raising that much cash relative to a company of their magnitude or
Back of the envelope math:
Majority of their portfolio is very short term, let's assume 6 months duration which is a 0.5yr weighted average life
300B in annual originations
Assume they can get similar leverage as US securitization markets, which would be 95% advance rate (5% "skin in the game" for Ant)
Then the equity required would be:
300B0.530%5% = ~2.25B, and they were planning to raise $30B as part of this IPO
The timing is weird because, in my opinion, that Ant rush to IPO after knowing the policy is going to come in effect soon. There were almost 3k fintech (p2p lenders), the government has been restricting the market, now there are 15 of them.
I remember reading Jack Ma is on record describing large Chinese bank business models as analogous to pawn shops and in general criticizing regulators. Probably had something to do with it.
I mean, no one can expect different thoughts from financial gamblers. Jack Ma was totally a non innovative person. Like his whole enterprise so far is following western examples and the playbook. Now he is happily adopting the financial revolution narrative, disguised under the tech innovator facade.
I would love to have something like Alipays integration here in Canada or in any western country.
They truly are doing something with technology that isn’t found anywhere in the west. Part of which is also due to WeChat penetration and coverage. But few western countries let you do so much with just a smartphone as China.
The big diffrence is debit card-based and credit card-based, Ant and Chinese banks take no responsibility of these one-off domestic transations and offer no consumer protection, while western banks need to worry about money-laundering and terrorism and risk management. WeChat Pay don't even offer customer support.
It's this special gated environment enabled payment tools, they just process this money and be done with it. Alipay & Wechat and Chinese banks don't care about what is your business doing are they shady or not, unlike Paypal.
I don’t believe this for a split second. I’m certain China cares if money being spent somehow harms the CCP. Their monitoring motivations are distinct from the west, but monitoring definitely exists.
You don't have to, it's just the way banking is done in China, sounds ridiculous?
Well, having banks blocking you transaction, and asking what it's for is it legitmate, or Paypal terminating accounts at will is ridiculous in China too, "it's my money none of your business". Also part of the reason why mobile games and micro-transation are so huge, there's no bank asking why are you spending repeatedly on Genshin Impact and do you want to take it back.
It's tied to your national ID for sure, but it stops there.
It's actually good for the CCP, coz corruption is lubricant and everybody is in it, you don't want to track who's behind this money, they don't even disclose how many dozen condos every official owns.
It's not uncommon, there are various scams esp around e-commerce review boosting gigs that trick you into paying upfront but into different accounts/scan alternate QR codes, once the money is transfered, it's very hard to get it back if not impossible.
The police don't really pursue these cases as the debit card money is all instant and already gone and often small in amount (won't even register it as a case if the money is less than 450 USD), occasionally they will do a blanket operation and arrest some unlucky scammers to make an example, simmilar to irl thefts.
If your are talking about account hacking, SIM swap is quite difficult in China as basically anything is tied to national ID nowadays (even posting comments online, this does provide security to their business model, not to mention they are aggressively pushing facial recognition on the app level, I have to install a local police station app to unlock front door that regularly scans my face and tied to my WeChat, they are conducting census through WeChat BTW), but there are methods such as basestation jamming to force phones back into 2G and intercept text messages, these are fairly uncommon.
As I've said, many of the hard work has already been done by the state or isn't required at all, it's realy a paradise environment for these payment tools, probably only in China.
Banks in US only block payments if they look like they might contravene US laws. China will have different laws, but moving large sums of money without reason is likely to raise flags over there too. According to your post, a Chinese bank will allow me to withdraw a million yuan in cash in one go without asking why and what I need it for. I find that difficult to believe.
No one tracks micro transactions, not in the States or anywhere. AML laws don’t kick in until 10K USD. And of course corruption is a problem in China. It’s also a problem in the States. None of these statements point to a crucial difference in banking. If anything a commercial bank in the US is far more likely to keep your transactions private, whereas a Chinese bank probably hands them over to the government as a pre-arranged periodic data dump.
If I have $100,000 USD equivalent in yuan in a Chinese bank account and try to have it transferred overseas in one go, they will certainly ask me questions. Similarly if I suddenly try to withdraw that amount in cash, I will be queried as well.
Ergo, as long as limits and thresholds exist, the banking systems are equivalent, and all we are left to quibble over is the what (or how much) and the why.
You simply can't do that, Yuan is nowhere near a freely convertible currency, it's a fundamental difference.
Once foreign money enters China, it's very hard to get it out, the CCP has a ministry dedicated to the control of it. Most of the people don't have the need for it.
What you are saying is irrelevant to Ant and banks in general. Ant doesn't care about foreign markets or your dollars, it's a Yuan-only payment tool operates inside mainland China for Chinese people, simple as that.
China's anti money-laundering law wasn't as strict as US's for sure, but that doesn't mean huge amount of cash flow from one or many accounts to another wouldn't draw red flags.
US banking system works that anyone can use the card even if they just found it on the street, and business owner can charge a card repeatedly for any amount even if the card owner is not present. The room for fraud is huge.
China's debit and credit card alike requires PIN code to send payment, where the owner would be required to confirm the number and enter the PIN code. And it has 2FA as a requirement for online banking, whether that's a text message received on a mobile phone, or a hardware 2FA. There is still room for fraud but a lot smaller.
To say US banks cares and Alipay, Wechat and Chinese banks don't care is kind of absurd. They exist in a almost entirely different financial ecosystem and norms. In the US, fraud protection is necessary otherwise no one would use their cards. While in China, fraud protection still needed, but rarely is the case. Those institutions only did what's necessary.
What exactly is truly innovative about Alipay? What features are missing from the current Canadian payments landscape that you feel Alipay can fill? Just curious.
They developed an database called oceanbase and thought it would replace IBM's machine and DB2 for banks, they failed miserably because of the deep transactional nature of conventional banking is not working well in their system designed for online payment processing.
But we've already got a oligopoly of sorts with in the financial system (in the US heavily reinforced by policy after the last 2008 recession down to 5 mega banks and thousands of smaller banks went under). So it will be more like corporate surveillance.
Which yes privacy laws can protect. Especially here in Canada.
It doesn't have to be that way if we had competent privacy rights protections.
Especially not the way WeChat and Alipay has been integrated with the Chinese government.
Yeah I'm not sure why I was down voted for that -- literally if you don't have these two "apps" (which the government monitors and censors), you can't function in modern Sino city life. Why we would want that in Canada is beyond me.
Trust me, you really don’t, I’m speaking in a country that did see much of the tech get adopted (Taiwan). I get how the method can be intriguing from a casual glance (I was like this when it started), but that quickly wore off when the wheels touched the ground. We spent way too much legislative resource trying to plug the holes, and I got to hear a lot of the problems from a friend of involved in regulating this (金融監督委員會 Financial Supervisory Commission). And after you finally spend enough efforts to make things work “properly” you’d basically end up duplicating the credit/debit card system. China made the method look successful and effortless because they can take shortcuts; for everyone else, just stick to cards, they are better in almost every way (if you get NFC working, which you should anyway).
From what I've gathered from the news, China's regulators was never too concerned about Ant's role as a payment provider, but as a lender.
I don't doubt technical innovation would always be a burden for regulators and lawmakers, but that does not make it fit to say that such innovation are worthless, because they provide a value to the general public, and that should not be stopped because those in the power of authority needs to do more work to make it 'in control'.
Credit card wasn't invented because the lawmakers had drafted the perfect law, nor should mobile payment. The law always comes in afterward, as it should be.
I did not imply the innovation is worthless. That’s exactly how innovation should work, it is as valuable to prove something does not work as come up with something that does. But that value is only meaningful if others learn from that. In other words, the innovation of mobile payment is not worthless, but attempts to adopt it at this point would be.
If you listen to his whole speech, he's making a lot of very generalized criticisms on China's financial regulatory systems, which as a whole aren't inaccurate. But you're left wondering at the end how does it specifically relate with what he's concretely asking for (which presumably is just increasing the specific rate at which "JieBei" short-term debts can be repackaged and re-securitized). In other words, it just seems like a big obfuscation and dance around to ask for neoliberalism without saying the word and strawmanning the flip side as obsolete "pawn shop mentality".
Granted, regulatory hurdles this late in the process seems super opaque and vindictive. But on the flip side, leveraging debt at this level seems like a massive systemic risk to the social order considering the risk ratings on the repackaged security will be equally opaque within the Ant debt product offerings. It's fascinating seeing this as China more or less writing Glass-Steagall on the fly the day before the IPO. Despite it looking like 2 kids fighting over an ice cream, I think it'll be massively consequential in A) demonstrating leveraging on new forms of financial instruments like ML-driven peer-to-peer lending based on massive amounts of Ant/Alibaba consumer data, and B) it being a fork in the road on China setting a precedent on neoliberalism or politics controlling capital.
People argued as those regulation not done in 1 month he is under pressure for 1 year. Finally the rumour of sanction come before the possible election of Biden, they force the card and get that up. Then force back. Thus is the final stand not the cause. He has been silenced fir quite a while now. Not to do that just when money is all in — the share has been subscribed and for this cancel just lost to margin interest alone is us$70m.
From what I can gather from public information, the loan volume is ~$300B/year and growing rapidly. If they have to hold a 3rd of that on their books, that’s a lot of capital they have come up with. And maintain a loss reserve. I guess, they are being asked to become a bank.
the 2% is not what they have on their balance. 2% of the total loan was from Ant group money, the rest 98% money are from banks and ABS.
Government has been restricting consumer borrowing for a few years now. Consumer borrowing is discouraged. It was easy money for tech companies, almost all tech companies are in this business including Tencent, Baidu, JD, 360 and so on.
a. Ant group is partially owned by a large group of elite foreign investors https://www.wsj.com/articles/ant-ipo-promises-8-billion-gain..., who will gain hugely from this IPO. The Chinese government doesn't want such a huge financial entity owned by foreign owners (even though they have claimed they are allowing more foreign entries in financial sectors). Also, China is suffering from dollar shortage/flight (foreign manufacturing moving out, foreign retailers moving in), and this IPO could exacerbate it
c. There is probably a lot of financial misreporting within Ant Group, as it is pretty commonplace for Chinese public companies - check out recently delisted Chinese companies in US stock exchanges. If this IPO is allowed to expand, that's game over for shanghai stock exchange sooner than later.
(if you ask me, why would anyone invest in any mafia pyramid scheme with no guarantee you'll get your money out...)
Ant is definitely not a pyramid scheme, if you've ever been to China you'd know.
But b. is very credible. Jack has been criticized by state media as he piled negative comments to the regulators and traditional lenders - and frankly the regulators were right. Ant essentially needs no deposit to lend, relying on big data and not any traditional financial safety instruments. It's been overlooked for a while but when you get the big benefit of living outside of regulations you shut up and take what you get, and not making a public fuss about how 'every bank is stupid for following regulations'.
Not necessarily deposits but reserves; the whole European financial crisis of 2008+ was over the question of "what IS the minimum reserve level for systemic safety?"?
> relying on big data and not any traditional financial safety instruments
This is the Boeing 737-MAX approach: it's not intrinsically safe, but we can cover its shortcomings with software.
I’m just saying a plane wouldn’t stay up without extensive software control. Substantially all the avionics on a plane are dedicated to covering the shortcomings and turning an intrinsically unsafe process into an exceptionally safe process.
> Ant is definitely not a pyramid scheme, if you've ever been to China you'd know.
As someone who lived in China for 9 years, these kinds of arguments are always really vacuous. Perhaps just say Ant isn't like Amway and has a low fraud rate (for China, anyways), which is probably enough to deflect the pyramid scheme argument without resorting to an authority fallacy.
He's not supporting his point by invoking his time in China. He's directly using it to deflate the other comment which _did_ use it as support for their claim.
It's appealing to an authority to say (or, to demonstrate from experience) that it is false authority.
> Ant is definitely not a pyramid scheme, if you've ever been to China you'd know.
I have been to China. As a foreigner I was not able to use any digital cash technologies (such as WeChat or Alipay). Did you have a Chinese bank account? How were you able to use Ant tech?
Apparently it’s recommended for visitors to get a Chinese bank account which was easy to do. At least it was in the past. Which I learned from a YouTube channel about living in China.
The guys sister visited for a few weeks and the first thing he did was take her to a bank and open an account. Which she was able to do as a foreigner.
I'm not sure what "recent" means, but 3-4 years ago when i first got to China it was very difficult to open a bank account as a foreigner, even with a huge wad of yuan in my pocket. It might just be the areas i visited, but i tried several different banks while traveling on a tourist visa and every single one said no.
I eventually was able to open an account, but i had to show proof of residence (apartment lease), proof of residence registration (obtained from local police), work permit and employment contract. Even opening a second account a couple years later (required because many employers in China will only pay into one specific bank) and speaking fairly fluent Chinese i had to go through the same song and dance.
That’s interesting, I may be wrong then about the odds in general of this approach. The guy had a work permit permit and lived in Shenzhen.
He now left China for good over various reasons and now makes anti China for a living (whom I’m sure is easy for anyone to find) but I remember that one distinctly being fairly recent. Upon second thought he may have referenced it in one of the videos of why he left China where one of his biggest complaints is how it’s harder for foreigners to live there than ever at the moment.
I personally don’t know much about the topic sadly. I was planning to go then the pandemic hit.
It is basically down to experience and efficiency of those operations and know-how. Beijing tends to be a tad slower and stricter. It is still infinitely better better than say, Nanjing, where no one in the branch has a clue how to do it.
You have to have a resident visa (like a Z working or a student visa). I've never heard of any bank giving bank accounts to tourists; on the other hand it is easy to get one when you have all the proper docs. Getting a credit card on the other hand...forget it.
One of the many exhausting things about living in China as a foreigner is how much of their tech infrastructure excludes anyone who is not a Chinese citizen. Aside from the challenge of getting Alipay set up, the moment you leave mainland China (even to Hong Kong) you can no longer use Alipay to pay for anything, even though Chinese citizens are able to do this without any trouble.
Similarly, a lot of government-mandated apps require you to enter a state ID number which foreigners are not issued. The worst was living there through the coronavirus lockdowns and travel restrictions, because every town had its own special corona app to prove you had a green health code, but hardly any towns supported registration with a foreign passport. I presume that's changed now (i don't live there any more), but it's China, so there will undoubtedly be a new hazy private/public partnership gimmick app that makes things awkward for foreigners.
China's law does not apply, at least not easily, to a foreign citizens acting on a foreign soil, thus the Chinese company providing service would mean huge legal hazard for them, which is not the case for chinese citizen, where the contract entered between two chinese entities are protected under Chinese law and can be argued on a court of that jurisdiction.
Not parent, I had a few Chinese bank accounts but at the time you needed a Chinese ID number to use digital cash technologies. And no, Ant never became a thing for me (left in late 2016).
The sales of shares privately to a group investors in 2018 sounds very dodgy to me. Frankly, listing the company in Shanghai Exchange will give it a much higher valuable than in an US exchange.
Right now Ant Group's valuation is way lower than their IPO price. It could even be bankrupt and be nationalized, depending on investigations into their books, and what the Chinese government feels like that day.
There won't be any Chinese luckin coffee shaninigans in US exchange by end of 2021, according to new accounting standards https://www.thenationalnews.com/business/markets/us-to-delis.... Also, expect a large wave of Chinese companies delisting in 2021.
Friendly warning: check your mutual and index funds exposure to Chinese companies on US exchanges.
Of course last round valuation would be lower than IPO price, that's why IPO is called exit for early investors. And valuation DOES NOT bankrupt a company.
Let me guess, it's going to be the mindless propaganda that you've been brainwashed with via tradional and social media. Let's find out.
> The Chinese government doesn't want such a huge financial entity owned by foreign owners (even though they have claimed they are allowing more foreign entries in financial sectors). Also, China is suffering from dollar shortage/flight (foreign manufacturing moving out, foreign retailers moving in), and this IPO could exacerbate it
If china is facing "dollar shortage", then why would they ban foreign money? Wouldn't they want more dollars? Also, don't people like you claim that china owns us because they own so much of our debt? If so, how can they be experiencing dollar shortage if they own over $1 trillion of US bonds? Also they are not allowing more "foreign entries" in financial sector but they are allowing more foreign entries in retail? Finally, if you think an IPO is going to affect "dollar shortage" issue, then you haven't a clue what you are talking about. What about all the other major tech IPOs, like BABA, which had significant foreign investment. Not to mention all the foreign venture capitalists in china? Why isn't china kicking them out? Has china banned foreign investment/capital?
> This is a big no no right now, especially since Xi's dictatorship is wobbly.
I thought he was an "emperor" for life. Now his "dictatorship" is wobbly? Be consistent. What's next? You are going to call him a mafia boss?
> check out recently delisted Chinese companies in US stock exchanges.
If what you are saying is correct, why isn't the other company affiliated with Jack Ma ( BABA ) delisted?
> (if you ask me, why would anyone invest in any mafia pyramid scheme with no guarantee you'll get your money out...)
But you were just complaining that "even though they have claimed they are allowing more foreign entries in financial sectors".
On the one hand, you are whining that the chinese aren't allowing more financial entries into their market. And then you claim that it's a mafia pyramid scheme that nobody should invest in. Shouldn't you be praising china for keeping "foreign entries" out of their "mafia pyramid scheme"? Once again, be consistent. Another student of peter navarro at the gordon chang's school of propaganda.
Not too long ago, many people on HN were deliberating on how Ant is a national security threat because Jack Ma is a CCP member, implying that Ant is basically a state-controlled organization. I wonder what those people have to say now.
Right now I am neither arguing whether it is or isn't a national security concern. I just want to highlight that people's general understanding of how things work in China is very poor, and that one should be careful with speculations like that. At the very least I think more people should recognize that the Chinese government and the CCP are not monoliths, and that the distance between "the boss of the company is a CCP member" and "the company is state-controlled" is larger than what many think.
It is and it isn’t. China is just special in the way that fraud and corruption commingle with business and government. It isn’t unique by any stretch, but it’s certainly...different.
I’ll put it this way: I take an extremely skeptical view of basically anything originating out of China in matters of this sort. I wouldn’t be surprised if “Ant is basically a state run company” and “Ma/Ant aren’t necessarily entirely instruments of the Chinese government” are both true in different contexts. That’s just how screwed up it is.
In China, support for the US, and western liberalism in general, is dropping. In 2020 it has reached a new low. One of the reasons for this is because mainland Chinese people feel that the western world doesn't judge them fairly, that the western world will never accept them.
Your comment is a good representation of what they're thinking of. Your comment basically comes down to "China can do no good". It doesn't matter what China's concrete actions are — in the end, an interpretation for those actions will be found in order to fit the narrative that China is sinister. You are in your full right to do this. But such an attitude has implications for the other party.
Why should Chinese people support western opinions, if they will never be accepted no matter what they do? Sometimes, China is willing to concede on a few issues in order to gain improved relations. But if improving relations is impossible, no matter how many concessions, then why should they concede anything? If one is treated like an enemy anyway, then one may as well become a real enemy, since there is no reputation to be gained.
For example, I've been arguing for a while that one of the reasons why they went ahead with the Hong Kong National Security Law after a year, is because they realized that they can't gain a better relationship with the US by not introducing the security law, so may as well do it and gain more social stability. But many people can't comprehend this idea because they're too stuck on the "China bad" narrative.
I am not arguing that China is all good — of course it isn't, China has lots of issues. But being skeptical of everything?
In this context, excessive cynicism is dangerous. It is a self-fulfilling prophecy. I fear that some day all this leads to increased polarization, and a hot war.
He did or the political party did. Also removing term limits isn't the same as giving oneself a lifetime position. Lots of countries don't have term limits. Like Germany for example. Nobody would claim merkel is a dictator.
> And yes, a dictatorship's stability can fluctuate.
Right. His dictatorship is so wobbly that he made himself emperor. Which is it?
There is lot you can criticize china, unfortunately, the nonsense you see on social media really misses the target. Whatever happened to the pathetic "winnie the pooh" nonsense?
> Right. His dictatorship is so wobbly that he made himself emperor. Which is it?
Are you are being deliberately obtuse?
It's entirely reasonable that his strength and stability could change from "strong" enough to remove his term limits to "wobbly". Or it could have fluctuated towards even stronger. It doesn't matter, the point is that stability is not a constant so your objection doesn't really make sense.
> Also, China is suffering from dollar shortage/flight (foreign manufacturing moving out, foreign retailers moving in)
No longer the case after COVID pandemic, Yuan is appericating
> The Chinese government doesn't want such a huge financial entity owned by foreign owners
Ant had been allowed to exist for a long time, I don't see this really as an issue.
TBH, b. is probably the most likely reason. Criticizing governmental authority is a dangerous act even for Jack Ma, especially when your business needs its blessing.
Also Ant's IPO had caused quite a lot of controversy even before this, like selling their own shares through Alipay, etc.
Anyway, I see this an isolated case, where the CN government wants to give Jack Ma a lesson to put him in place.
For A, it's not possible to for Ant group's listing to
exacerbate China's dollar shortage, as Ant's business is done in CNY and investors would be trading in CNY, at least for it's Shanghai listing.
> How can Jack Ma belong to the Chinese communist party, and also own a huge company? Does communism not mean what it used to mean any more?
- to own a huge company in China, you would have to be a member of the CCP. Otherwise it would be stripped from you and you would be jailed.
- as of 2019, companies over 50 employees have a CCP cell in their office. The CCP is now going after even smaller companies in 2020.
- communism is totalitarianism. That means the society is strictly controlled top-down, from Dragon Families/Xi to the lowest peasant. The families pillage China on a national scale (Three Gorges power generation revenue, etc.), while the CCP has ultimate control of literally everything else.
- China has had tremendous growth, funded by the West, but aggressively-managed by local officials with KPIs, etc.
- the CCP is modelled on the Soviet Union, but on steroids
- It's reported that the top 100 CCP officials have personal wealth of around $2 billion each.
There seem to be at least two large factions in CCP when dealing with Ant Financial. In exaggerated terms:
1. The statists who want strict control over financial giants like Ant Financial. They created the new regulations.
2. The neo liberals who are much friendlier to capitalists. They helped rush through the IPO.
My guess is that neo liberals got wind of the impending regulations, which is the reason for the rushed IPO schedule and Jack Ma’s criticism of Chinese and international banking systems.
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[ 2.3 ms ] story [ 194 ms ] threadWhat does this mean? Does this sentence even say anything?
So, the next step for the Chinese regulators is to suspend the whole thing for the dust to settle.
IPO at its relative late stage with a gigantic valuation, leaving little for retail investors to gain from. And its whole IPO process is preferential treatment at its finest, almost looked like Jack Ma can do whatever he wanted.
Ant and Ma's condescending posture did draw a fairly big backlash, it's certain pratices border on non-compliance, and Ma's beneficiaries are mostly from the last leadership, these probably helped put a brake on it.
Isn't this just following a trend for larger and later IPOs?
https://www.vox.com/2014/9/11/6134529/a-new-york-stock-excha...
But it's not the case for Chinese domestic markets.
:o that sounds quite frothy.
In the IPO files Ant Group declared itself as a "tech company" under supervision of Ministry of Cyberspace. LOL
I don't know the details of the situation so I'd be happy to hear from someone who knows more, but this deal could've been a huge win for Chinese financial markets. Down the road, unexpected government action like this could hurt investor confidence and depress the amount of money Chinese companies will be able to raise from foreign investors.
At its core, Ant is more of a lending company, re-distributing money it got from banks at much higher interest rates (typically 15%, some banks offer personal credit loans at around 4%) and leverage. Tho it insists on it's high-tech, in order to boost valuation and avoid financial regulation, but how many more debt can the population pile on itself?
Sidenote: Its business model profits from people that traditional banks snubed, mostly from lower social classes.
It's not, a healthy market need to curtail monopolies. Granted, it's no longer early 20th century and you can't just break them up like Standard Oil because that doesn't make any sense, but regulations are sorely needed across the pond.
In Ant's case, it is the unexpected nature of the action and lack of transparency that I see as damaging. Not necessarily the action itself. I'm still trying to learn what is going on and why, I haven't made a judgement on the action itself.
Jack Ma appears mixing modern tech with his own idea about the financial system. Watching his onstage chat with Elon Musk and WAI 2020 shows that he is not interested so much of using tech to innovate, and his true interests might be in using tech to manage and control. Not too surprising for a tech baron raised in a totalitarian country.
Ant has trouble of some sort and it hits home hard.
I agree about unpredictable regulations, but I thought that was kinda the status quo there anyway.
The 2% they were operating under was a joke (less than 1/3rd Lehman’s capitalization), 30% on the other hand, seems outright punitive if true.
Timing is weird too.
During the financial crisis, the core issue is that banks were making loans off their own balance sheet with reserves too small to cover the losses that eventually occurred. In other words, when borrowers defaulted the bank itself lost money. This made them insolvent and caused the whole collapse.
In the case of Ant on the other hand, they essentially function as a lead generation platform for banks - currently 98% of "their loans" aren't really theirs at all, but rather are funded by their partner banks; if the loan defaults, it's the partner bank's problem, not Ant's.
The reason this change is such a big deal is that forcing Ant to fund 30% of its own loans will require raising an absolutely enormous amount of fairly expensive capital, driving up costs and significantly decreasing the value of the company.
Though my position is that 30% capitalization is actually reasonable and that our current collective level of leverage is unnecessarily unstable.
https://www.lowyinstitute.org/the-interpreter/many-trails-an...
Back of the envelope math: Majority of their portfolio is very short term, let's assume 6 months duration which is a 0.5yr weighted average life 300B in annual originations Assume they can get similar leverage as US securitization markets, which would be 95% advance rate (5% "skin in the game" for Ant)
Then the equity required would be: 300B0.530%5% = ~2.25B, and they were planning to raise $30B as part of this IPO
They truly are doing something with technology that isn’t found anywhere in the west. Part of which is also due to WeChat penetration and coverage. But few western countries let you do so much with just a smartphone as China.
It's this special gated environment enabled payment tools, they just process this money and be done with it. Alipay & Wechat and Chinese banks don't care about what is your business doing are they shady or not, unlike Paypal.
It's tied to your national ID for sure, but it stops there.
It's actually good for the CCP, coz corruption is lubricant and everybody is in it, you don't want to track who's behind this money, they don't even disclose how many dozen condos every official owns.
The police don't really pursue these cases as the debit card money is all instant and already gone and often small in amount (won't even register it as a case if the money is less than 450 USD), occasionally they will do a blanket operation and arrest some unlucky scammers to make an example, simmilar to irl thefts.
If your are talking about account hacking, SIM swap is quite difficult in China as basically anything is tied to national ID nowadays (even posting comments online, this does provide security to their business model, not to mention they are aggressively pushing facial recognition on the app level, I have to install a local police station app to unlock front door that regularly scans my face and tied to my WeChat, they are conducting census through WeChat BTW), but there are methods such as basestation jamming to force phones back into 2G and intercept text messages, these are fairly uncommon.
As I've said, many of the hard work has already been done by the state or isn't required at all, it's realy a paradise environment for these payment tools, probably only in China.
No one tracks micro transactions, not in the States or anywhere. AML laws don’t kick in until 10K USD. And of course corruption is a problem in China. It’s also a problem in the States. None of these statements point to a crucial difference in banking. If anything a commercial bank in the US is far more likely to keep your transactions private, whereas a Chinese bank probably hands them over to the government as a pre-arranged periodic data dump.
It's a big deal.
Ergo, as long as limits and thresholds exist, the banking systems are equivalent, and all we are left to quibble over is the what (or how much) and the why.
Once foreign money enters China, it's very hard to get it out, the CCP has a ministry dedicated to the control of it. Most of the people don't have the need for it.
What you are saying is irrelevant to Ant and banks in general. Ant doesn't care about foreign markets or your dollars, it's a Yuan-only payment tool operates inside mainland China for Chinese people, simple as that.
US banking system works that anyone can use the card even if they just found it on the street, and business owner can charge a card repeatedly for any amount even if the card owner is not present. The room for fraud is huge.
China's debit and credit card alike requires PIN code to send payment, where the owner would be required to confirm the number and enter the PIN code. And it has 2FA as a requirement for online banking, whether that's a text message received on a mobile phone, or a hardware 2FA. There is still room for fraud but a lot smaller.
To say US banks cares and Alipay, Wechat and Chinese banks don't care is kind of absurd. They exist in a almost entirely different financial ecosystem and norms. In the US, fraud protection is necessary otherwise no one would use their cards. While in China, fraud protection still needed, but rarely is the case. Those institutions only did what's necessary.
They developed an database called oceanbase and thought it would replace IBM's machine and DB2 for banks, they failed miserably because of the deep transactional nature of conventional banking is not working well in their system designed for online payment processing.
That's a out it.
But we've already got a oligopoly of sorts with in the financial system (in the US heavily reinforced by policy after the last 2008 recession down to 5 mega banks and thousands of smaller banks went under). So it will be more like corporate surveillance.
Which yes privacy laws can protect. Especially here in Canada.
It doesn't have to be that way if we had competent privacy rights protections.
Especially not the way WeChat and Alipay has been integrated with the Chinese government.
I agree with all your points.
I don't doubt technical innovation would always be a burden for regulators and lawmakers, but that does not make it fit to say that such innovation are worthless, because they provide a value to the general public, and that should not be stopped because those in the power of authority needs to do more work to make it 'in control'.
Credit card wasn't invented because the lawmakers had drafted the perfect law, nor should mobile payment. The law always comes in afterward, as it should be.
Granted, regulatory hurdles this late in the process seems super opaque and vindictive. But on the flip side, leveraging debt at this level seems like a massive systemic risk to the social order considering the risk ratings on the repackaged security will be equally opaque within the Ant debt product offerings. It's fascinating seeing this as China more or less writing Glass-Steagall on the fly the day before the IPO. Despite it looking like 2 kids fighting over an ice cream, I think it'll be massively consequential in A) demonstrating leveraging on new forms of financial instruments like ML-driven peer-to-peer lending based on massive amounts of Ant/Alibaba consumer data, and B) it being a fork in the road on China setting a precedent on neoliberalism or politics controlling capital.
Do not blame the messenger.
the 2% is not what they have on their balance. 2% of the total loan was from Ant group money, the rest 98% money are from banks and ABS.
Government has been restricting consumer borrowing for a few years now. Consumer borrowing is discouraged. It was easy money for tech companies, almost all tech companies are in this business including Tencent, Baidu, JD, 360 and so on.
a. Ant group is partially owned by a large group of elite foreign investors https://www.wsj.com/articles/ant-ipo-promises-8-billion-gain..., who will gain hugely from this IPO. The Chinese government doesn't want such a huge financial entity owned by foreign owners (even though they have claimed they are allowing more foreign entries in financial sectors). Also, China is suffering from dollar shortage/flight (foreign manufacturing moving out, foreign retailers moving in), and this IPO could exacerbate it
b. Jack Ma recently criticized the Chinese banks https://www.pymnts.com/news/ipo/2020/jack-ma-summoned-for-qu.... This is a big no no right now, especially since Xi's dictatorship is wobbly. Also this is what happens when you upset the world's largest mafia - Chinese government and Chinese state owned companies. Just look at what happened to Australia https://www.abc.net.au/news/2020-11-03/china-broadens-trade-..., South Korea https://www.vox.com/latest-news/2017/3/3/14795636/china-sout... US https://www.defensenews.com/global/asia-pacific/2020/10/26/c... and Japan https://www.nytimes.com/2010/09/23/business/global/23rare.ht...
c. There is probably a lot of financial misreporting within Ant Group, as it is pretty commonplace for Chinese public companies - check out recently delisted Chinese companies in US stock exchanges. If this IPO is allowed to expand, that's game over for shanghai stock exchange sooner than later.
(if you ask me, why would anyone invest in any mafia pyramid scheme with no guarantee you'll get your money out...)
But b. is very credible. Jack has been criticized by state media as he piled negative comments to the regulators and traditional lenders - and frankly the regulators were right. Ant essentially needs no deposit to lend, relying on big data and not any traditional financial safety instruments. It's been overlooked for a while but when you get the big benefit of living outside of regulations you shut up and take what you get, and not making a public fuss about how 'every bank is stupid for following regulations'.
> Ant is definitely not a pyramid scheme, if you've ever been to China you'd know.
> frankly the regulators were right. Ant essentially needs no deposit to lend
Not necessarily deposits but reserves; the whole European financial crisis of 2008+ was over the question of "what IS the minimum reserve level for systemic safety?"?
> relying on big data and not any traditional financial safety instruments
This is the Boeing 737-MAX approach: it's not intrinsically safe, but we can cover its shortcomings with software.
As someone who lived in China for 9 years, these kinds of arguments are always really vacuous. Perhaps just say Ant isn't like Amway and has a low fraud rate (for China, anyways), which is probably enough to deflect the pyramid scheme argument without resorting to an authority fallacy.
hmm...
It's appealing to an authority to say (or, to demonstrate from experience) that it is false authority.
I have been to China. As a foreigner I was not able to use any digital cash technologies (such as WeChat or Alipay). Did you have a Chinese bank account? How were you able to use Ant tech?
The guys sister visited for a few weeks and the first thing he did was take her to a bank and open an account. Which she was able to do as a foreigner.
I don’t know if that has changed recently.
I eventually was able to open an account, but i had to show proof of residence (apartment lease), proof of residence registration (obtained from local police), work permit and employment contract. Even opening a second account a couple years later (required because many employers in China will only pay into one specific bank) and speaking fairly fluent Chinese i had to go through the same song and dance.
He now left China for good over various reasons and now makes anti China for a living (whom I’m sure is easy for anyone to find) but I remember that one distinctly being fairly recent. Upon second thought he may have referenced it in one of the videos of why he left China where one of his biggest complaints is how it’s harder for foreigners to live there than ever at the moment.
I personally don’t know much about the topic sadly. I was planning to go then the pandemic hit.
In ALL other regions ( including Beijing ) it is either weeks / months or literally impossible. ( Because no one knows how to do it )
Similarly, a lot of government-mandated apps require you to enter a state ID number which foreigners are not issued. The worst was living there through the coronavirus lockdowns and travel restrictions, because every town had its own special corona app to prove you had a green health code, but hardly any towns supported registration with a foreign passport. I presume that's changed now (i don't live there any more), but it's China, so there will undoubtedly be a new hazy private/public partnership gimmick app that makes things awkward for foreigners.
There won't be any Chinese luckin coffee shaninigans in US exchange by end of 2021, according to new accounting standards https://www.thenationalnews.com/business/markets/us-to-delis.... Also, expect a large wave of Chinese companies delisting in 2021.
Friendly warning: check your mutual and index funds exposure to Chinese companies on US exchanges.
Let me guess, it's going to be the mindless propaganda that you've been brainwashed with via tradional and social media. Let's find out.
> The Chinese government doesn't want such a huge financial entity owned by foreign owners (even though they have claimed they are allowing more foreign entries in financial sectors). Also, China is suffering from dollar shortage/flight (foreign manufacturing moving out, foreign retailers moving in), and this IPO could exacerbate it
If china is facing "dollar shortage", then why would they ban foreign money? Wouldn't they want more dollars? Also, don't people like you claim that china owns us because they own so much of our debt? If so, how can they be experiencing dollar shortage if they own over $1 trillion of US bonds? Also they are not allowing more "foreign entries" in financial sector but they are allowing more foreign entries in retail? Finally, if you think an IPO is going to affect "dollar shortage" issue, then you haven't a clue what you are talking about. What about all the other major tech IPOs, like BABA, which had significant foreign investment. Not to mention all the foreign venture capitalists in china? Why isn't china kicking them out? Has china banned foreign investment/capital?
> This is a big no no right now, especially since Xi's dictatorship is wobbly.
I thought he was an "emperor" for life. Now his "dictatorship" is wobbly? Be consistent. What's next? You are going to call him a mafia boss?
> check out recently delisted Chinese companies in US stock exchanges.
Is it misreporting or is it the trade war?
https://www.reuters.com/article/us-usa-trade-china-limits-id...
If what you are saying is correct, why isn't the other company affiliated with Jack Ma ( BABA ) delisted?
> (if you ask me, why would anyone invest in any mafia pyramid scheme with no guarantee you'll get your money out...)
But you were just complaining that "even though they have claimed they are allowing more foreign entries in financial sectors".
On the one hand, you are whining that the chinese aren't allowing more financial entries into their market. And then you claim that it's a mafia pyramid scheme that nobody should invest in. Shouldn't you be praising china for keeping "foreign entries" out of their "mafia pyramid scheme"? Once again, be consistent. Another student of peter navarro at the gordon chang's school of propaganda.
Right now I am neither arguing whether it is or isn't a national security concern. I just want to highlight that people's general understanding of how things work in China is very poor, and that one should be careful with speculations like that. At the very least I think more people should recognize that the Chinese government and the CCP are not monoliths, and that the distance between "the boss of the company is a CCP member" and "the company is state-controlled" is larger than what many think.
I’ll put it this way: I take an extremely skeptical view of basically anything originating out of China in matters of this sort. I wouldn’t be surprised if “Ant is basically a state run company” and “Ma/Ant aren’t necessarily entirely instruments of the Chinese government” are both true in different contexts. That’s just how screwed up it is.
Your comment is a good representation of what they're thinking of. Your comment basically comes down to "China can do no good". It doesn't matter what China's concrete actions are — in the end, an interpretation for those actions will be found in order to fit the narrative that China is sinister. You are in your full right to do this. But such an attitude has implications for the other party.
Why should Chinese people support western opinions, if they will never be accepted no matter what they do? Sometimes, China is willing to concede on a few issues in order to gain improved relations. But if improving relations is impossible, no matter how many concessions, then why should they concede anything? If one is treated like an enemy anyway, then one may as well become a real enemy, since there is no reputation to be gained.
For example, I've been arguing for a while that one of the reasons why they went ahead with the Hong Kong National Security Law after a year, is because they realized that they can't gain a better relationship with the US by not introducing the security law, so may as well do it and gain more social stability. But many people can't comprehend this idea because they're too stuck on the "China bad" narrative.
I am not arguing that China is all good — of course it isn't, China has lots of issues. But being skeptical of everything?
In this context, excessive cynicism is dangerous. It is a self-fulfilling prophecy. I fear that some day all this leads to increased polarization, and a hot war.
Xi did arrange himself a lifetime position. And yes, a dictatorship's stability can fluctuate.
He did or the political party did. Also removing term limits isn't the same as giving oneself a lifetime position. Lots of countries don't have term limits. Like Germany for example. Nobody would claim merkel is a dictator.
> And yes, a dictatorship's stability can fluctuate.
Right. His dictatorship is so wobbly that he made himself emperor. Which is it?
There is lot you can criticize china, unfortunately, the nonsense you see on social media really misses the target. Whatever happened to the pathetic "winnie the pooh" nonsense?
Are you are being deliberately obtuse?
It's entirely reasonable that his strength and stability could change from "strong" enough to remove his term limits to "wobbly". Or it could have fluctuated towards even stronger. It doesn't matter, the point is that stability is not a constant so your objection doesn't really make sense.
No longer the case after COVID pandemic, Yuan is appericating
> The Chinese government doesn't want such a huge financial entity owned by foreign owners
Ant had been allowed to exist for a long time, I don't see this really as an issue.
TBH, b. is probably the most likely reason. Criticizing governmental authority is a dangerous act even for Jack Ma, especially when your business needs its blessing.
Also Ant's IPO had caused quite a lot of controversy even before this, like selling their own shares through Alipay, etc.
Anyway, I see this an isolated case, where the CN government wants to give Jack Ma a lesson to put him in place.
- to own a huge company in China, you would have to be a member of the CCP. Otherwise it would be stripped from you and you would be jailed.
- as of 2019, companies over 50 employees have a CCP cell in their office. The CCP is now going after even smaller companies in 2020.
- communism is totalitarianism. That means the society is strictly controlled top-down, from Dragon Families/Xi to the lowest peasant. The families pillage China on a national scale (Three Gorges power generation revenue, etc.), while the CCP has ultimate control of literally everything else.
- China has had tremendous growth, funded by the West, but aggressively-managed by local officials with KPIs, etc.
- the CCP is modelled on the Soviet Union, but on steroids
- It's reported that the top 100 CCP officials have personal wealth of around $2 billion each.
My guess is that neo liberals got wind of the impending regulations, which is the reason for the rushed IPO schedule and Jack Ma’s criticism of Chinese and international banking systems.