April 28, 2021
By Eswar Prasad
“Ant Group, China’s biggest fintech conglomerate, was preparing last November for its initial public offering. Analysts projected it would raise $34 billion, the largest sale of shares in history. The company, founded by Jack Ma, had become synonymous with financial innovations, which are often risky.
In the run-up to the I.P.O., Chinese regulators trying to assess financial risks on Ant’s books had been brushed off by Mr. Ma. In an audacious speech, he criticized regulators as too cautious and pilloried state-owned banks for their “pawnshop” mentality of providing loans only to borrowers who could post collateral.
Even oblique attacks on China’s government rarely go unpunished. This was a direct provocation. Yet such was Mr. Ma’s aura, and his apparent imperviousness to government strictures, that domestic and foreign investors were unconcerned. They salivated at the prospect of buying shares of Ant — it was, after all, a politically powerful behemoth and indispensable to the economy. Its Alipay platform, which pioneered remarkably cheap and efficient payment technologies, has revolutionized China’s financial system. Other arms of the conglomerate provide consumer credit and small-business loans online within minutes.
Then it all fell apart. Two days before Ant’s shares were to begin trading on the Hong Kong and Shanghai exchanges, the government blocked the I.P.O. Regulators cited the company’s opaque accounting practices, which, they said, could be hiding huge amounts of risky loans. Given Ant’s sheer size, they noted, any problems could roil financial markets and hurt investors. . . . “