South China Morning Post
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A logo of Ant Group is pictured at the headquarters of the company, an affiliate of Alibaba, in Hangzhou, Zhejiang province, China. Photo: Reuters
Opinion
Editorial
by SCMP Editorial
Editorial
by SCMP Editorial

Delay to Ant IPO shows Beijing’s desire to get the rules right

  • There was a great deal of disappointment when Chinese regulators halted the world’s largest initial public offering at the last minute, but concerns and criticisms need to be put into perspective
SCMP Editorial
SCMP Editorial
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There has been much disappointment after Chinese regulators pulled the plug on the world’s largest initial public offering at the last minute. Given the global frenzy for the shares of Ant’s dual listing in Hong Kong and the mainland, the reactions are understandable. But concerns and criticisms need to be put into perspective. While the timing was awful, there was a justifiable regulatory explanation.
Losses to the main stakeholders, already very rich, are limited; potential investors will get their money back. In the longer term, the delay may even benefit investors. If the IPO had gone ahead, the company’s subsequent valuation might have fallen. Draft regulations recently released require fintech platforms to provide much higher funding to back loans and to cap loan size to borrowers. The new rules could significantly change Ant’s profitability and risk profile.

Hong Kong will remain a favourite destination for new listings. The IPOs of the Tencent-backed video-sharing developer Kuaishou and ride-hailing firm Didi Chuxing are expected to go ahead.

Unlike traditional banks, fintech companies are so new that no country has yet figured out a standard regulatory regime for them. Instead of painting Ant Group and Chinese regulators as being at loggerheads, it’s more accurate to see them as frustrated dance partners still trying to learn the new moves together.

Both sides have a point. Fintech players can’t be allowed to run wild, and in China, Ant is the largest of them all. Better regulatory protocols need to be put in place before the horse bolts from the barn. The staggering size of Ant’s IPO probably caught regulators by surprise. But Jack Ma, founder of Ant and Alibaba, was also right in his by now infamous speech in which he argued standard regulations for traditional lenders were behind the curve and should not pull back the development of fintech. Alibaba owns this newspaper. The speech has been interpreted as a challenge to the communist authorities and so triggered regulators to step in. That’s unlikely.

Chinese regulators won’t drop the US$35 billion mother of all IPOs just to show who the boss is. They would have had direct approval from the highest authority to intervene at such a late hour.

Beijing has made it clear that economic stability and control of financial risks are a top priority. A financial crisis is seen as a national security threat. The external environment will remain volatile as the global economy is battered by the Covid-19 pandemic and the only major economy to show growth is China’s. And whoever sits in the White House, the United States remains a formidable challenge.

Top Chinese leaders have to walk a fine line between maintaining economic stability and advancing the nation’s global lead in digital banking and online payments. Delaying an IPO, however mega, is a small price to pay for getting the new regulations right.

This article appeared in the South China Morning Post print edition as: Delay to Ant IPO shows Beijing’s desire to get the rules right a small price to pay for getting new rules right
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