The deployment of foundation models in various industries signifies a transformative shift, but it is not about introducing a single, powerful solution to replace existing workflows. 

Instead, this era of AI agents involves a nuanced and iterative process of aligning technology with engineering practices and market needs. On Thursday, founders of two Chinese AI unicorns, BaichuanAI and MiniMax, joined a forum with the president of Ant Group to discuss deploying foundation models for industries at the 2024 INCLUSION·Conference on the Bund in Shanghai.

After LLM

Baichuan AI has chosen healthcare as its focus for deploying AI models. Headquartered in Beijing, the company is valued at over RMB 20 billion and has received support from major players in China’s technology sector and investment funds from several local governments.

Founder Wang Xiaochuan noted that Baichuan AI is approaching the health sector via two main groups, pediatricians and general practitioners. The company aims to achieve low-cost and accessible healthcare by next year, and to alleviate hospital congestion.

“Creating super applications is not just a technical challenge; it also requires a collaborative development process with the industry,” Wang said. Public reports reveal that Baichuan AI has enlisted experts above the deputy chief physician level from 100 top hospitals to annotate data for its AI model, with the aim of enhancing the model’s accuracy and reliability.

In a separate keynote speech, renowned computer scientist Harry Shum echoed a similar sentiment: “The advent of the AI agent era will not involve a magical, all-powerful model suddenly replacing all workflows. Instead, it will be about the ongoing refinement and integration of technology, engineering, and market demands, ultimately delivering services that exceed human expectations.”

In a panel discussion on the same day, Peng Yang, Chief Executive Officer of Ant International and Senior Vice President of Ant Group, highlighted that over 70 countries have begun adopting open banking, with increasing reliance on AI to support this transition. In this context, he emphasized that privacy-preserving computing can break data silos, enabling businesses to collaborate without sharing raw data. This fosters the development of new business models and enhances customer service both domestically and internationally, making his view particularly relevant as AI becomes integral to open banking efforts.

Future trends

Since OpenAI released several Sora-generated AI video demos earlier this year, there has been a surge in investment in text-to-video technology. Last week, the Chinese AI startup MiniMax also launched a Sora-like tool video-1, becoming the latest tech company in the country to enter the sector.

While AI model applications are a prominent trend, a key issue becomes increasingly clear: the speed of innovation in applications depends on whether the underlying technology is solid and robust.

At the forum, MiniMax founder and CEO Yan Junjie emphasized his current focus on pushing the boundaries of AI through technological optimization. He stated that if the model’s error rate can be reduced to single digits, it would be considered reliable, allowing AI to evolve from an assistant into a productivity tool. 

“This shift could lead to genuinely mainstream products and drive fundamental changes in the industry,” Yan added.

On the same day, Ant Group’s Alipay launched an independent app called Zhixiaobao, an AI-powered assistant that connects to Alipay’s lifestyle service ecosystem and can quickly book tickets, order food, hail a cab, and find nearby dining and entertainment options.

Ant Group President and CFO Cyril Han summarized the goal of AI model-powered products as being “easy to use, useful, and affordable.”

Emphasizing the second of these three goals, Han added that if users mention that the AI lifestyle assistant is useful, “I think that would be even more meaningful.”

Low-profile AI firm MetaSota has received a fresh cash injection led by Ant Group, according to a LatePost report, as the Alipay owner adds the Chinese company to its artificial intelligence investment portfolio.

The over RMB 100 million ($13.9 million) round of fundraising propelled six-year-old MetaSota’s valuation to $150 million. 

Why it matters: The deal is the latest in a series of investments secured by Chinese artificial intelligence companies, despite amounting to considerably less than the billions of yuan committed to MetaSota’s rivals in the field in recent months. 

Details: LatePost reported that Baidu and Tencent also considered participating in the financing, but fintech giant Ant Group finally sealed the deal with investment fund Lightspeed China Partners.

• Another of MetaSota founder Min Kerui’s ventures, Chinese natural language analysis cloud service provider BosonNLP, was acquired by Ant Group in 2018. That same year, Min built MetaSota, since becoming a hub of artificial intelligence products including a legal AI translation tool and article generation software.
• In March, MetaSota launched an AI-powered search tool and received over 7 million visits, making it the third most-used tool in a flurry of AI products in China that month, trailing only Baidu’s ERNIE Bot and Moonshot AI’s Kimi, according to traffic-monitoring platform SimilarWeb.

Context: Beyond MetaSota, Ant Group has invested in at least six Chinese AI companies since ChatGPT kicked off the artificial intelligence product boom. Large model trainers ZhipuAI and Moonshot AI, video generation companies AIsphere and ShengshuAI, as well as chip firm MoffettAI have all received funding from the fintech giant.

Alipay owner Ant Group has appointed current chief financial officer Han Xinyi as its new president, according to an internal email from chairman and CEO Eric Jing on Tuesday. The move is part of the firm’s biggest overhaul since the cancellation of its IPO in late 2020, with the fintech company also deciding to grant three of its units operational independence.

Why it matters: The restructuring is likely to grant more flexibility for businesses within the fintech affiliate universe of Alibaba and is intended to unleash their growth potential under Ant’s globalization strategy.

Details: The reshuffle is “just one of many” in Ant’s future growth, said Jing, adding that, “we will create an environment that encourages more emerging businesses, and creates greater value for society” (our translation).

• Ant International, commercial database OceanBase, and Ant Digital Technology, the three “innovative businesses” that will become independently operated subsidiaries, will set up their own board of directors and reduce their reliance on the group.
• According to a report by Chinese media outlet LatePost, Ant will continue to offer technology and capital support to the three independent units as they are still making a loss, but they are set to launch stock option plans separately in an effort to retain talent.

Context: On Nov. 3, 2020, two days before Jack Ma-founded Ant’s scheduled dual listing debut which was supposed to take place simultaneously in Hong Kong and Shanghai, the major IPO was surprisingly halted by China’s financial regulator. 

• The announcement from the Shanghai Stock Exchange at the time noted that the actual controller, chairman, and CEO of Ant were “called in for regulatory talks by relevant authorities,” which it said might lead to the firm “not meeting the conditions for issuance and listing or the disclosure requirements.”
• China’s primary financial regulatory bodies fined Ant Group and its subsidiaries RMB 71.23 billion last July, a hefty fine that was seen as marking the end of the authorities’ close scrutiny of the fintech giant.

Alipay, a digital payment service operated by Alibaba-affiliated Ant Group, is taking steps to monetize its 1 billion-strong user base by doubling down on livestreamed e-commerce, a route taken by many other Chinese platforms with vast user pools.

The fintech giant also announced an updated international version of Alipay on Thursday that promised to make it easier for foreign visitors to China to use the digital payment service using Visa, Mastercard, and other major credit cards.

Why it matters: Labeled an “important strategic partner” by Alibaba, Ant Group is focused on preparing for a Hong Kong IPO. This puts pressure on the Jack Ma-founded business to accelerate commercialization with a more diversified business ecosystem.

Details: The twin updates, unveiled on Thursday at this year’s Alipay Partner Conference, are a key part of the company’s expansion into “digital connectivity,” a term that refers to providing merchants with product and service interfaces such as mini-programs within their digital operations.

• The “living channel” on the payment app’s homepage serves as a hub where merchants and influencers share short videos, lifestyle content, and engage in livestreaming. The live rooms that promote goods are mainly conducted by the brands themselves, adopting a similar style to Taobao Live. Viewers are directed to brands’ mini-apps once they click on a link located at the bottom right of the live page, enabling them to place an order within Alipay.
• Alipay’s livestreaming product manager, Zhu Qinmei, told the conference that the company believes the average transaction value per user in Alipay’s livestreaming rooms could surpass the industry average by two or three times. Alipay has also mentioned an approach for sellers to upload their products to a centralized “product pool,” where influencers can select specific items for promotion within their individual live rooms.
• Mini-programs, which are effectively apps within a bigger app such as WeChat and Alipay, are increasingly regarded as vital drivers of business growth in China. The number of active mini-programs on Alipay has surged by 119% in the past year, according to He Yongming, vice president of Ant, while the gross merchandise volume (GMV) generated by merchant mini-programs has risen by 79%. Alipay has not yet disclosed the scale of total sales. By comparison, WeChat mini-programs achieved a transaction volume in the tens of trillions of yuan in 2022, marking a year-on-year growth of over 40%.
• As for the second announcement of the day, Alipay has updated its international version as it looks to enhance user experience for foreign customers, by integrating frequently-used travel services, including hotel booking, air ticket booking, ride-hailing, public transport, and exchange rate checking.

Context: The Jack Ma-backed Ant Group has reportedly been undergoing significant restructuring ahead of its listing in Hong Kong. This may involve the separation of certain non-core operations of its finance-related business. The decision comes after Ant was hit with a nearly $1 billion fine in early July, in a signal by the Chinese authorities that it was concluding its crackdown on the firm in the wake of its abrupt abandoning of what was expected to be the world’s biggest IPO in late 2020.

On Thursday, the annual World Artificial Intelligence Conference (WAIC) officially opened in Shanghai. This year’s conference places a heavy focus on the trendy topic of the metaverse, aiming to demonstrate the integration of artificial intelligence with the metaverse and to look at what the future holds for these technologies.

Ken Hu, rotating chairman of Huawei, said at the opening ceremony that AI can only realize its greatest value when it is deeply integrated into operation scenarios across all industries. He also called for building a computing power network, connecting different data and computing centers across the nation. Meanwhile, he pointed out that because powerful machine learning models are costly to develop and time-consuming, industries and academic researchers should team up and collaborate to cut down “duplicated investment and development.”

Robin Li, co-founder and CEO of Baidu, discussed various AI implementations the search engine company adopts, such as autonomous driving and content generation. He said some of the video content on Baidu are generated by AI based on published articles. Those AIGC (AI-generated content) costs only a tenth of the cost of human-created content and a fraction of the speed.

“AI is critical in the metaverse due to the metaverse’s needs to adapt to changing environments and user preferences,” Qualcomm president and CEO Cristiano Amon said at the ceremony, adding that the processing of massive data in the metaverse will push the expansion of AI processing capability to edge computing, which will result in more large-scale deployment of AI applications.

One of the highlights of WAIC 2022 on the ground is the “Metaverse Core Exhibition,” which focuses on the AI+Metaverse industry ecosystem, and in particular, examines the two dimensions of virtual experience and reality display. Some of the key technology displayed include various chips for AI models and servers, large-scale machine learning models, autonomous vehicles, and surgical robots, among others. Here are some of the highlighted products from our visits to the event:

1. Baidu’s machine learning model Wenxin 

Artificial intelligence has entered the era of developing large-scale machine learning models since 2018, integrating smaller and dispersed models into a powerful one. 

In 2020, OpenAI’s NLP model GPT-3 kickstarted the AI large-scale model arms race. Google, Microsoft, Meta (formerly Facebook), Huawei, Alibaba, Huawei, and other tech giants have all become involved in it. 

Baidu’s large-scale model “PCL-BAIDU Wenxin” is a generalized model developed by Baidu for various general scenarios and combined with the capabilities of the Baidu Knowledge Graph. It is widely used in the energy, finance, and aerospace sectors. Baidu also uses the model to offer AI painting to consumers. 

Taking the creative service platform “Yige” as an example, it can generate paintings based on the user’s text inputs. Two minutes after TechNode’s reporter entered “Godzilla in the Moonlight,” the system created seven different styles of paintings and labeled corresponding use cases.

This application is currently at the internal testing stage and is expected to be open to users for payment in the future, according to the official introduction. Compared with foreign AI painting products such as Google’s Imagen, Baidu’s “Yige” has a strong ability to generate images for different styles, and it also understands Chinese semantics better. 

2. Ant Group’s privacy computing technology  “SecretFlow”

As data become a key resource in society, many industries are facing new challenges in ensuring cybersecurity and data security. Against this backdrop, privacy-preserving computing can be a key technology to balance data security and data circulation, involving numerous professional technology stacks.

In July, Chinese fintech giant Ant Group officially made its privacy-preserving computation framework “SecretFlow” open source for global developers.

According to Ant Group’s on-site staff at WAIC, SecretFlow is an integrated work of privacy-preserving computation technology and application that the Chinese tech giant has precipitated for six years, incorporating more than a thousand patents and covering all mainstream privacy computing technologies. SecretFlow has made a major breakthrough in Trusted-Environment-based Cryptographic Computing (TECC), which can achieve modeling and analysis of one billion dense samples per hour. 

3. Biren BR100 GPU chip 

Shanghai-based Biren Technology, a domestic high-end GPU chip unicorn revealed its first general-purpose GPU chip series, the BR100 at this year’s WAIC.

The BR100 is based on the original chip architecture developed by Biren Technology, with a 7nm process that can accommodate 77 billion transistors, and this product is the first to adopt chiplet technology and PCIe 5.0 PCI Express, as well as supporting CXL protocols in China. 

A representative from the firm told TechNode that the BR100 will be major a rival to the forthcoming Nvidia H100, which will be affected by a new US ban on exports of high-end GPU chips to China, though Biren is yet to confirm when its new chip will go into mass production. 

This chip will be mainly deployed in data servers to provide computing power for large-scale AI training scenarios, smart cities, and the metaverse.

4. Westwell’s driverless vehicle Q-Truck

As a company that’s gone global from Shanghai, Westwell Technology uses artificial intelligence and driverless technology to explore developments in autonomous logistics.

The company’s Q-Truck, the world’s first intelligent battery-swap driverless commercial vehicle, can fully recharge in as little as 6 minutes without the need for a human to intervene in the process.

According to Westwell, the Q-Truck has a load capacity of 80 tons and a battery life of 200 kilometers. What’s more, the fleet system is able to manage multiple unmanned trucks at the same time, achieving mixed operation between driverless and manned vehicles due to the integration of digital systems.

5. HiScene’s industrial AR glasses and software 

As one of the leading industrial AR companies in China, HiScene presented its AR glasses HiAR H100, AR remote communication and collaboration platform HiLeia, and AR real-time spatial editor PinNotes at WAIC this year.

The majority of HiScene’s user cases are in factories and various manufacturing industries. Helping technicians to do more accurate remote inspections and other remote duties. 

With PinNotes, users can directly add associated virtual content to reference objects in the physical world via AR glasses or cellphones, which will then be saved to the AR platform and can be read out for re-editing and viewing, bringing users an experience of spatial interconnection, virtual-real integration and intelligent interaction.

Ant Group, the company behind China’s popular mobile payment service Alipay, is seeing an accelerated adoption rate for its payment services outside of China, less than two years after launching a pilot cross-border payment project. 

Why it matters: The company has pushed to expand in Asia and Europe as countries begin to reopen and offline shopping activities recover. 

• Ant’s businesses in China have faced increased regulatory scrutiny since halting its massive IPO in late 2020. At the same time, China’s consumption has entered a slow period due to recurring pandemic outbreaks and external geopolitical pressure.

Details: On Monday, Singapore-based payment platform 2C2P and Ant entered a strategic partnership, with Ant becoming the platform’s majority shareholder. During the first week of April, Ant saw more than 70,000 merchants outside of China sign up for a business-to-business mobile payment service called Alipay+. The service, launched in September 2020, allows people and merchants from different countries to transact using their local digital wallets. 

• With Alipay+, Ant provides the technology backend and related financial service for digital wallet operators and merchants worldwide, connecting shops with various digital wallet users. For example, the service allows people with a supported Malaysian payment app to shop and pay with their local app in some shops in South Korea. 
• The service supports various digital wallets worldwide, including Malaysia’s Touch ‘n Go eWallet, South Korea’s Kakao Pay, the Philippines’ GCash, Thailand’s TrueMoney, Indonesia’s Dana, and Europe’s Klarna.
• In early April, German drugstore chain Müller, South Korean chain store GS25, and Malaysian company Razer Fintech announced their integration with Ant’s service, allowing their merchants the ability to transact using overseas digital wallets. 
• In March, Ant Group appointed Jia Hang as the new regional head in Southeast Asia. Jia is expected to expand Ant’s ongoing plan to attract more small merchants in the region to use its services. 
• Ant has already integrated more than 1 million offline merchants in Asia and Europe, covering industries including food and beverages, tourism, hospitality, and retail, according to a Monday company statement shared with TechNode. 

Context: Ant Group has quietly pushed to expand its businesses outside of its home country as China intensifies regulatory pressure in the fintech sector.  

• In November 2020, Ant Group suspended what would have been a record-setting $34.5 billion IPO offering in Hong Kong and Shanghai.
• Alibaba, which has a 33% stake in Ant, was fined RMB 18.2 billion ($2.8 billion) for antitrust violations last April. 
• While China adheres to a strict dynamic-zero Covid-19 policy to control local outbreaks, many other Asian countries have begun moving to a full reopening since the beginning of April. South Korea and Singapore reopened to fully vaccinated visitors on April 1, and Indonesia has lifted all quarantine rules for international travelers.

Ant Group promotes more NFT-like digital collectibles ahead of the traditional Chinese New Year. BSN launches an NFT infrastructure platform. Hangzhou to expand the use of digital yuan during the upcoming Asian Games. JD supports digital yuan payments through hardware wallets. 

NFTs for the Chinese market

• Ant Group’s blockchain and tech arm AntChain launched an NFT-powered campaign ahead of the Chinese New Year (which starts on Feb. 1 this year according to the lunar calendar). The subsidiary worked with 24 museums in China to create digital versions of famous Chinese animal antiques, representing the twelve creatures of the Chinese zodiac. Users can buy these digital artifacts through the mini-program Topnod on Alipay, Ant’s popular payment app. Unlike NFT platforms elsewhere, most Chinese platforms don’t allow buyers to resell or trade their purchases due to government regulations aimed at minimizing speculation. (AntChain)

• China’s state-backed Blockchain-Based Service Network (BSN) launched an NFT infrastructure platform in the country on Tuesday. The BSN-Distributed Digital Certificate (BSN-DDC) is an infrastructure platform for individuals and companies to build portals or manage NFTs that are compliant with Chinese regulations, which prohibit trading, mining, and speculation of crypto assets. The platform integrated and localized 10 popular public chains, including Ethereum and Corda. (Coindesk)

Digital yuan promotion

• In a five-year plan from a local financial administration in the eastern province of Zhejiang, the government signalled an expansion of pilot zones for China’s digital yuan. The report laid out plans to encourage qualified regions to apply to China’s central bank for the right to host pilot zones, and popularize the use of the national digital currency during the 2022 Asian Games, due to be held in Zhejiang’s capital city of Hangzhou in September. (Huanqiu, in Chinese)
  
  
• China’s e-commerce major JD now supports digital yuan hardware wallets, making it the first online retailer to support this payment method. Users with a digital yuan hard wallet can pay through JD’s app, as long as their phone supports Near Field Communication (NFC), a technology that allows data transfers between devices that are placed close to each other. JD’s fintech arm JD Technology is also a technical service provider for the digital RMB pilot projects. (TechWeb, in Chinese)

Hello Inc., a Chinese bike rental app backed by Ant Group, canceled plans for a New York IPO amid tightening regulatory scrutiny on overseas IPOs. 

Why it matters: Formerly known as Hellobike, Hello Inc. is the latest Chinese tech company to backtrack on overseas IPO plans since Chinese regulators tightened review processes on overseas listings in early July. 

• As a bike-sharing and transportation app, Hello’s possession of users’ traveling and mapping data, alongside its overseas funding plan, could attract attention from China’s cyberspace authority, which banned ride-hailing giant Didi from app stores shortly after it listed in New York. 

READ MORE: How did Didi get in trouble with data regulators?

Details: The Shanghai-based company is applying to withdraw an IPO plan filed in April, according to a Tuesday filing to the US Securities and Exchange Committee. 

• A Hello spokesperson told TechNode that the company made the decision with “careful consideration by the company’s management.”
• “We will advance the IPO procedure in accordance with national regulatory requirements and the capital market environment in the future,” the person added.
• Hello may now seek to list in markets like Hong Kong or Shanghai Stock Exchange’s Nasdaq-style STAR Market, according to people from the company familiar with the matter. The company has been operating on losses in the past three years, according to its prospectus.

Context: Since July, a slew of Chinese tech firms, including social commerce app Xiaohongshu and fitness app Keep, have suspended overseas IPO plans. 

• China’s cybersecurity authority is revising regulations to require companies that control data of more than one million users to seek regulatory permission before filing for overseas IPOs.
• Hello is one of the main players in China’s bike-sharing market, competing with Didi’s Qingju, and Meituan Bike. The company is a survivor of China’s bike rental craze that began around 2017. 
• In addition to Ant Group, Hello is backed by top investors, including Fosun Group, GGV Capital, and Shenzhen Venture Capital.

READ EVEN MORE: INSIGHTS | The bike rental boom is dead. Long live bike rental

Blockchain technology’s tamper-proof and distributed nature will be key to building mutual trust and enabling lower cost trade solutions that will allow small and medium enterprises (SMEs) to benefit from the coming economic recovery, Geoff Jiang of AntChain said recently.

In a speech at the Economist’s Global Trade Week conference, Jiang, President of Ant’s Intelligent Technology Business Group said that AntChain, an Ant Group technology brand, is using blockchain to simplify global trade for small businesses. The conference was held this year from June 28 to July 2.

AntChain’s solutions are already seeing wide global adoption, from cross-border trade, to artwork and food authentication, to the sporting world. 

European football authorities adopted the AntChain platform as their global blockchain partner for the Euro 2020 and 2024 championships, launching the football world’s first blockchain-enabled trophy, designed by Ant Group, at yesterday’s EURO 2020 final. Cristiano Ronaldo won the Alipay Top Scorer Gold Trophy with a record of five goals and one assist. The trophy, known in previous years as the “Golden Shoe,” carries a link to a blockchain record of goals scored during the tournament. Patrik Schick won the silver trophy, and Karim Benzema the bronze.

Blockchain can also be used to digitize the full end-to-end trade value chain, bringing certainty and trust to all participants along the chain, said Jiang during his speech at the Economist event. Blockchain technologies, including distributed ledgers, smart contracts, and encryption, can ensure trade data is trusted and tamperproof, as well as supporting automated payments and payment processing in business workflows, he said.

These features will lower the threshold to cross-border trade and allow more small businesses to take part in international trade. He cited the example of AntChain’s digital platform for international trade and financial services, called Trusple, short for “trust made simple.”

The platform allows trading partners to encode contracts, payments, and shipping data onto a secure ledger, automatically transferring money when shipping conditions are fulfilled. The system reduces the need for record-keeping and much complicated banking procedures, allowing merchants to save time and bolster efficiency. 

Ant Group also shared the story of one of Trusple’s first customers on its official Medium page.

Yuan Jing’s China-based company, Jingcan Glass Products, specializes in glass crystal ornaments and semi-finished products that are often incorporated into clothing and accessories. 

Most of her company’s clients are located overseas in markets such as India, Pakistan, Central America, South America, Europe, and the United States. In the past, Yuan had to bear the risk if customers failed to pay on time, as well as spending time on administrative steps like confirming orders, confirming invoices, and confirming bank remittances. 

With Trusple, Ant said, all she has to do is sign the contract, and the ensuring steps will run automatically. Trusple’s technology allows the buyer’s and seller’s banks to process payment settlements automatically through smart contracts. This process not only automates the intensive and time-consuming processes that banks traditionally conduct to track and verify trade orders, it also ensures information is tamper-proof.

“Business owners don’t need to understand blockchain hash rates or smart-contract oracles,” Jiang said. “Instead, they can focus on running their businesses more efficiently, while Trusple provides them with the guarantees and management to ensure timely payment and delivery.”

Jiang compared blockchain technology to global communications and trade revolutions such as the telegraph and shipping containers. Like these technologies, he said, the application of the blockchain to the real world economy will revolutionize international trade by transforming the global movement of all digital commerce.

“The future we are building will be exciting for SMEs. Buyers, sellers, and their banks will have near frictionless processes and settlements through smart contracts,” Jiang said. “The future will be more complex, but we believe technology can continue to improve to tackle the complexity.”

Editor’s note: This article was supported by Ant Group. We believe in transparency in our publishing and monetization model. Read more here.

In China, big tech is in the regulators’ crosshairs. Since financial regulators spiked an IPO for Ant Group, the Alibaba-affiliated fintech giant that was slated to outraise Saudi Aramco, tech majors have had to get used to fines, investigations, and meetings with regulators. This big tech crackdown shows no sign of slowing down.

Most recently, Reuters reported that ride-hailing firm Didi Chuxing is facing an anti-monopoly probe as it prepares for a New York IPO. Alibaba was hit with a $2.8 billion fine in April. JD delayed an IPO for fintech unit JD Technology in the wake of the Ant fiasco. Tencent and Meituan are both reportedly the target of antitrust investigations.

In May, TechNode launched a techlash tracker, aiming to take stock of the big tech crackdown by counting enforcement actions. So far, we’ve identified 29 such events, and we’re regularly adding to it.

How do we make sense of the trend?

Bottom line: China is working through a broad change in its approach to managing tech giants. The crackdown is broader than anti-monopoly, finance regulation, or Jack Ma, seemingly reflecting a change in attitudes to the power of big tech.

It’s a big deal, but it’s surely not the end of big tech. No one ever got big in China tech without knowing how to work with the state, and so far, we see regulators prioritizing compliance over punishment.

But expect to see business models changed, especially around lending and the use of data, likely in ways that will cut into profits for tech majors.

How the crackdown affects tech

It’s not about fines: Compared to the size of the companies, the fines are small. Alibaba’s $2.8 billion fine, a record for Chinese antitrust, represents only about a week and a half of the company’s revenue. Other companies have seen fines in the millions: tutoring platforms Zuoyebang and Yuanfudao paid RMB 2.5 million ($389,000) for unfair competition, while community group buy platforms paid up to RMB 1.5 million.

It is about changing businesses: Ant didn’t pay a fine, but it was forced to agree to a far-reaching “rectification plan” in the wake of its failed IPO that will likely leave it looking a lot more like a bank. Fidelity estimated that these changes will wipe out about $150 billion in value, about half the company’s valuation pre-fiasco.

READ MORE: INSIGHTS | Deciphering the Ant Group rectification plan

A lot happens behind the scenes: In fintech, we’ve seen JD Technology and Tencent prepare to make changes along the lines of Ant Group without publicly getting involved in investigations. Chinese authorities often care more about getting their way than getting a pound of flesh, and many changes will likely be carried out without the public knowing exactly who made the decisions.

Big tech will survive: Rumors that Ant Group would be broken up do not seem to be panning out. While it’s likely to look quite different after rectification, it appears that it and other targets will emerge still massive.

Five ways to understand a crackdown

So what’s the crackdown about?

1. Anti-monopoly is the most active area of enforcement right now. It’s also the biggest change—until late 2020, the anti-monopoly law was not successfully applied to tech majors.

We’ve identified 18 events, starting in December last year. Led by the State Administration for Market Regulation (SAMR), it appears that the campaign will hit every leading firm in the sector. To date, only Alibaba has seen a major fine, while other tech majors have paid small fines for failing to submit mergers and acquisitions for review or face reports of ongoing investigations. The focus of investigations seems to be on the widespread “choose one of two” model under which major e-commerce platforms demand exclusivity from merchants. Didi, Meituan, and Tencent are all reportedly targets of ongoing investigations.

Tencent has also faced lawsuits from ByteDance and private citizens over its practice of blocking users on messaging platforms from opening links that lead into apps from other major tech ecosystems.

We expect to see bigger fines and orders to change business practices as investigations unfold, but it’s not clear if the campaign will challenge the dominance of monopolies on the Chinese web. Choose one of two, or blocking links, are pretty marginal elements of the power of big tech.

2. Privacy enforcement dates back farthest, and has affected the great number of companies. We’ve identified seven events, dating back to 2019. Typically, we see dozens or hundreds of companies fined in each event, for issues like over-collecting data or failures to store it securely. With major data breaches a routine event even at major tech firms, it’s no surprise that fines are common. These fines have come from the Cybersecurity Administration and the Ministry of Industry and Information Technology.

Fines over data violations have come in parallel with a series of laws on data collection and storage that experts have said are turning China from one of the world’s least regulated data environments to one of its most. These laws limit the transfer of much data outside of China, and create what Control Risks’ Carley Ramsey described as a “mandatory how-to guide” for cybersecurity at TechNode’s Emerge conference last year.

3. Financial de-risking also dates back years. Beijing’s campaign to bring lending under control originally focused on bank loans to “zombie” state-owned companies. But the spectacular collapse of hundreds of online peer to peer lending companies around 2018 showed that small loans to individuals could also drive risks. By 2019, regulators had largely shuttered the once-thriving industry.

But the Ant Group IPO fiasco marked a new wave of fintech regulation. Financial authorities, most importantly the central bank, became concerned that online lending products offered by Ant and its peers—often available during checkout on major e-commerce platforms—were leading retail borrowers into unsustainable levels of debt, and creating systemic risks. After a dramatic intervention, the company and its peers are transforming into more bank-like entities, which will likely focus more on profiting off loan interest than using data to sell loans to other investors. It’s also likely these companies will take steps to add friction to taking out loans.

We’ve identified only three events in the fintech crackdown, but they were doozies. So far, JD Technology and Tencent’s fintech divisions appear to be mirroring the changes at Ant without a public regulatory proceeding.

4. Jacklash may be the most popular frame, but for our money it’s the least convincing taken alone. This theory holds that Alibaba founder Jack Ma fell out of favor with politicians first, and that the Ant suspension and Alibaba antitrust case flowed from that. The theory doesn’t explain why so many non-Ma firms have been caught up in the crackdown. But it is true that his Ant Group and Alibaba have suffered by far the biggest consequences so far. Our feeling is that you don’t have to pick between believing in the policy story or the personalities story—often, they go together. TechNode doesn’t cover politics, but we can recommend some reading on how a policy disagreement turned nasty.

5. Data monopolies are a speculated fifth theme. Some clued in observers predict that the crackdown will end with tech giants forced to share—or at least, to rent out—their data. The Wall Street Journal recently reported that Ant Group is in talks to share its data with a state-backed ratings company, which would fulfill a request regulators have made for years. Protocol recently wrote that companies, both Chinese and multinational, may soon have to comply with wholesale requests from the government for user data.

Tiffany Wong, a consultant at research-based consultancy Sinolytics, told TechNode that there is evidence that data monopolies are one of the issues on regulators’ minds. SAMR’s ruling on Alibaba, she said, argues that “because they own so much data on trade, logistics, etc., they have a huge benefit over competitors. They’re able to do calculation for targeted marketing, and because they own all this data the market entry barriers are very high for other platforms.” Influential former central bank chief Zhou Xiaochuan argued that the amount of data held by platform companies is a threat to competition in a Macau speech last November.

What’s behind it?

Beijing is clearly rethinking how it governs tech. But why now? Outside the policy issues listed above, there’s two more factors worth considering.

One is popular tech skepticism. In recent years, the Chinese public has turned from admiration to skepticism of big tech, following a global trend. Repeated scandals and controversies over extreme working schedules like 996, dangerous false advertisements, and deeply indebted young people have made big tech a popular target. Critical reporting on tech firms regularly goes viral, while self-organized groups of angry consumers are getting traction with companies like Tesla.

On the other side is an international movement toward regulation. On Thursday, the US House Judiciary Committee approved the final piece of a package aimed at curtailing big tech companies’ power to use their platforms to promote their other business lines. The move could make it easier for lawmakers to break up the likes of Facebook, Google, and Amazon.

In fact, China’s concerns are not too different to the arguments made by American thinkers like Elizabeth Warren, Tim Wu, and Dina Srinivasan. Beijing’s privacy model is based on Europe’s GDPR. As China cracks down on big tech, it’s participating in a global trend.

Graphics by Chris Udemans

Fintech giant Ant Group’s troubles began in November 2020, when Chinese regulators suspended its $34 billion IPO two days before a dual listing in Shanghai and Hong Kong. Beijing made it clear that the Alibaba-owned company would not be able to list in its current form.

China’s central bank then announced in December 2020 that it had summoned Ant for a meeting with financial regulators led by the People’s Bank of China (PBOC), and by February, the fintech platform had reportedly reached a deal to restructure.

READ MORE: Deciphering the Ant Group rectification plan

But what are observers saying in Chinese?

Searching for comment on the Ant rectification plan, TechNode found very few independent analyses. But within the range of commentary available, we saw dramatic predictions that included Ant itself being broken up, and Ant-like rectification plans being imposed on a broad range of big tech fintech platforms. 

The key question:

Has the other shoe dropped?

Ant’s restructuring will be costly, and complicated. But maybe the announcement of a plan means that at least it can move on, some commentators write.

Latest Caixin Weekly | Ant’s restructuring begins
Caixin, April 18

Half a year after braking hard on its IPO, the shoe has basically dropped for Ant Group’s restructuring.  

Chinese finance magazine Caijing Tianxia agrees in “Summoned for a second time, Ant is not the same Ant,” citing a 9% jump in parent company Alibaba’s stock price on April 12 as a reflection of the market’s belief that the uncertainty is now resolved. Caijing Tianxia writes that the market has now reversed the previous drop in Alibaba’s share price when Ant Group’s IPO was halted in November 2020. 

But another expert warns that while restructuring Ant as a financial institution will put it more under Beijing’s control, the action by itself is too vague to determine the future of the company.

Summoned for a second time, Ant is not the same Ant
Caijing Tianxia Weekly, April 13

“Currently, it is still too early to say the shoe has dropped,” [Chinese Academy of Social Sciences] senior financial researcher Zhang Ming told Caijing Tianxia. This means that in the future Ant will be considered a financial institution, the core purpose being one of control, but the specifics of how supervision will land still require the development of further rules. 

What’s next for Ant?

Zhang also makes a more dramatic prediction: he argued that Ant will most likely need to be broken up in order to comply with national regulations.

“Ant currently has only determined an overall direction. Whether it will specifically be broken up in the future or not is still very difficult to tell. But without being broken up, supervision would be very difficult to implement.” Zhang Ming said that splitting the asset management business from the investment banking subsidiary is already a sort of correction. If Ant does not continue breaking apart, it will then be very difficult to really fit into the supervision framework of the People’s Bank of China, the China Banking and Insurance Regulatory Commission, and the China Securities Regulatory Commission. Would it be the Banking and Insurance Regulatory Commission or the Securities Regulatory Commission that would be responsible? When banks make missteps, the Banking and Insurance Regulatory Commission issues a notice. But if Ant were to be placed under supervision, who would issue the notice? It probably won’t continue being a ‘special affairs’ case.”

—Caijing Tianxia Weekly, April 13

Ant restructures, businesses that annually create over RMB 160 billion in revenue will all be affected
Gong Fangyi
Late Post, April 13

Gong Fangyi, in WeChat public account Late Post, predicts that regulations will cause Ant Group’s money market fund Yu’ebao to shrink in size, limiting the company’s earning potential. Gong argues that restrictions on Yu’ebao will have consequences for the rest of the company, because it is the basis of the company’s cash flow, a platform allowing Ant to offer financial services to users and to turn a profit off of unused cash stored in Alipay.

The scale of Yu’e bao has also been limited by regulations. Yu’e bao is the basis of Ant’s financial flow. Hundreds of millions of Alipay users put their unused money in Yu’e bao where they begin investing, and then, they purchase funds, investment products, and use Huabei.

Who’s next?

It’s clear to all commentators that Ant isn’t just Ant: it’s a precedent. Pan mentions both fintech and the broader platform economy in his interview. How far does the precedent stretch?

Paidai argues that fintech is part of the financial sector. Like many articles, it quotes a key line phrase from Pan: platform companies “should not make technology a ‘camouflage’ for illegal activities.”

Ant Group summoned again, things are too difficult for Alibaba
Zhang Xiaomang
Paidai, April 13

In recent years, fintech and the platform economy have rapidly developed. This has played an important role in improving the effectiveness of financial services, in promoting the spread of beneficial aspects of the financial system, and in lowering transaction costs. At the same time, because [fintech] has the specific characteristics of crossover operations, mixed-industry operations, and cross-regional operations, the rate at which risk spreads is higher, the surface area is greater, and the negative spillover effects should then be stronger. This has created new challenges for financial supervision.

[Regulators] meet with Ant Group again, what serious signals have been released?
Xia Bin
The Country is a ‘Through Train’, April 12

A WeChat account operated by the state-owned China News Service, also writes that Ant Group’s restructuring sets a precedent for the financial sector.

With an eye for the long term, while taking into account the current situation, making up for shortcomings, strengthening weaknesses, it should be said that the idea that all financial activities will be under financial supervision is very clear.

Pan’s answers this time also emphasize that the Financial Management Department will continue the principles of “fair supervision” and “strict supervision.” In other words, for any business that even touches upon financial services, the Financial Management Department will certainly implement strict supervision.

But it goes farther, writing that platform businesses as a whole should follow Ant. After describing monopolistic tendencies in the fintech industry, the article says that the same issues exist in the broader platform economy.

This list of problems [in fintech] has commonalities with other platform businesses. Promoting the issue of self-evaluation in platform companies, promptly and proactively making changes is also the deep purpose in [Pan Gongsheng] answering reporters’ questions.

Experts interviewed by Caijing Tianxia predict that the fallout from Ant would affect much of Big Tech, noting that most of the major tech empires have mimicked at least some of the behaviors that got Ant in trouble. Director of the Institute of Finance and Banking at the Chinese Academy of Social Sciences Yin Zhentao told Caijing Tianxia that because Ant Group opened a can of worms as the leader, other e-commerce and social networking platforms that have gotten involved in fintech will also need to change.

As a pioneer in internet fintech, Ant can be said to have gotten off to a bad start. Up to the present, digital payment and credit have almost become the standard products for internet companies getting involved in the financial sector, which include Tencent, JD.com. Yin Zhentao believes that after this time of Ant Group being summoned, other internet companies will also implement the corresponding changes.

—Caijing Tianxia Weekly, April 13

Economist Song Qinghui also told Caijing Tianxia that Ant is not the only company with unfair market practices as identified by Chinese regulators, naming other tech majors with fintech plays. 

Ant Group undoubtedly is a pioneer in internet fintech. After it, giants such as JD.com, Tencent, Xiao Mi, Meituan, Baidu, 360 are all lining up. They all want to take advantage of their user streams and get into financial services. Famous economist Song Qinghui believes that there exists, at varying levels, issues of disorderly development, unfair competition, privacy issues, and harm to consumer rights in these leading internet companies, which accumulate into quite sizable risks and hidden dangers.  

Song said that e-commerce giant JD.com watched as Ant Group tested the waters first and then followed in its footsteps. Caijing Tianxia added that JD.com-affiliated JD Digits, which has now been folded into JD Technology, changed its mind on going public after Ant’s IPO was halted.  

“Jack Ma crossed the river by feeling for stones. [JD founder] Liu Qiangdong crossed the river by feeling for Jack Ma.” JD Digits, which originally wanted to follow Ant’s model, has now also terminated its plan to go public on the Science and Technology Innovation Board.“

—Caijing Tianxia Weekly, April 13

More shoes

Despite the positive reaction of the market to the release of the rectification plan on April 12, official voices say that Ant Group is still not in the clear. 

Shoes continue to fall, if not for Ant then across its peer group. Most recently, China’s central bank and four other regulatory agencies told leading internet companies, including Tencent Holdings, Didi Chuxing, and JD.com, on April 29 that their platforms should stop provision of other financial services beyond payments. 

For Chinese media, one thing is certain. Regulators have used Ant Group to set a precedent for other tech giants wanting to adopt the company’s lucrative business model of linking various services normally provided by banking institutions with its core payment platform. 

The leading platforms have responded in turn. Almost 36 of China’s internet companies, including ByteDance, Baidu, Pinduoduo, and JD.com had pledged to comply with the country’s antritrust laws by April 14, two days after Ant Group met with regulators and four days after parent company Alibaba was fined a record-breaking RMB 18.2 billion ($2.8 billion).

A year ago, Ant Group was riding high. Since it was founded in 2014, it had become, by its own description, China’s dominant fintech company. It was set to raise $34 billion in blockbuster dual listings in Shanghai and Hong Kong in November 2020.

But it was not to be. Two days before its listing, Chinese regulators shut it down, citing changes to the regulatory environment that Ant hadn’t disclosed in its IPO prospectus. They made it clear, Ant would not be allowed to list in its current form.

The company, supervised by regulators, has since been negotiating its “rectification” behind closed doors.

The tech world has been in suspense for months. How much will Ant change? Will it be allowed to retain its data-driven core business, or forced to change into something much more like an online bank?

The answers depend both on opaque conversations between the business and government, and on an emerging body of fintech regulations.

On April 12, the company met again with regulators. In a readout, it said it had “completed the formulation of our rectification plan.” In another meeting readout on behalf of the regulators, one of the central bank’s deputy governors, Pan Gongsheng, a key figure in the government’s effort to oversee Ant’s revamp, confirmed that a plan was formed and added a little more detail.

So, is Ant Group’s future clear?

READ MORE: UPDATED: Ant Group IPO delay and Jack Ma’s ill-timed speech

Bottom line: Clearer. We know about the plan only from two very brief statements, from Ant Group and Pan. There’s a lot we still don’t know.

With a rectification plan in place, changes should accelerate across the company. It appears that the company will continue providing the same services, but will change how it is organized, accounted for, and regulated. The brief statements don’t tell us much about the key question of managing data flows between digital payments and microlending.

We don’t know much about Ant’s understanding with its regulators. Both statements agreed that there are five points in the rectification plan. But they don’t agree on what the points are. We can make some informed guesses based on areas of overlap, but some big questions are still hanging over the company.

Whatever will happen to Ant, it will set a precedent for the governance of platform companies.

What we learned

The new information: Last week, we got a trickle of new information about these questions.

• Ant wrote a terse press release announcing that it had a rectification plan, in English, on its WeChat account. 183 words summarize the specifics of the plan.
• Pan, a deputy governor at the People’s Bank of China (PBOC), made a one-paragraph comment about the plan during an interview on the plan and fintech regulation more broadly with official media (in Chinese).
• State media quoted the regulators’ readout of the meeting, given by Pan: the PBOC, the China Banking and Insurance Regulatory Commission (CBIRC), China Securities Regulatory Commission (CSR), and the State Administration of Foreign Exchange (SAFE).

The confusion: Ant and Pan both describe a five-point plan, but they do not agree on what exactly those points are, or how to order them.

• It’s hard to separate the five points in Ant’s English statement, but the Chinese version clearly outlines them. We’ve broken them up below according to the Chinese.
• Pan’s five are different. For example, he puts antitrust first in his statement, but Ant places it in sub-point three of point five.
• Adding to this confusion is the fact that many of the regulations they are referring to are still in development, or so brand new that courts haven’t had time to interpret them.
• Both statements also refer to a third set of five demands (in Chinese) by the central bank deputy governor in December 2020, which don’t line up perfectly with either statement.

So, we have three sets of five points that have some overlap but are not the same; a penta-triptych in an impressionist style.

What they said (in the order of appearance in the statements as published):

Financial holding company

This is Ant Group’s first point, but only ranks third in Pan’s list. Ant will set up a financial holding company “in its entirety,” it said. This will affect how the company is regulated. Recently China has been making new regulations for financial holding companies, but we don’t know that much about how they’ll be applied yet.

Does it lend? Ant Group has always said it’s not a bank and it shouldn’t be regulated like one.

• Ant doesn’t make money the same way banks do. Banks lend out money and earn profits from interest.
• Ant Group behaves more like a loan originator, such as Countrywide: it finds people who want financial services—such as loans, investment products, or insurance—and connects them to finance companies. It makes money by charging providers what it calls “technology fees” for helping them find customers.
• Ant owned only 2% of the RMB 2.15 trillion in loans it has created; the rest were underwritten by its partner banks.
• But Ant Group also owns 30% of MyBank, which underwrites loans enabled through Ant’s credittech platforms. MyBank is Ant’s second-largest customer, according to the IPO prospectus, accounting for 6.2% of Ant’s revenue in Q1 2020.

The same goes for investments and insurance: Out of the RMB 4.1 trillion of assets that go through its investmenttech platforms, only 33% of that is directly managed by Tianhong Asset Management, a company that Ant Group has a 51% stake in.

• Ant’s insuretech platforms enabled RMB 52 billion worth of insurance premiums contributions. But its licensed subsidiary only accounted for 9% of those.

But regulators say “same industry, same regulation.” In his interview, Pan said that platform companies “should not make technology a ‘camouflage’ for illegal activities.”

Now what? The company’s operations likely won’t change dramatically, but the way it runs its books will: Rules for financial holding companies will require it to behave a lot more like a bank—which will likely drag on its profitability.

• Financial holding companies “only manage equity investment and do not directly engage in commercial business,” according to trial measures for this type of corporate structure issued by the State Council in September 2020.
• The regulatory framework sets requirements for registered capital and corporate governance rules. It also places these companies under the purview of the People’s Bank of China (PBOC).
• “Ant will have to inject a significant amount of capital to meet the capital adequacy requirement, and also need cash to meet the manage liquidity risk appropriately,” Li Nan, associate professor of finance at Shanghai Jiaotong University’s Antai College of Economics and Management, told TechNode.
• More detailed rules on balance sheet management, leverage ratios, and capital adequacy requirements might be drafted later, Chinese media have reported.
• Ant Group will still be able to “enjoy the benefits of economies of scale,” but with “Chinese walls” separating the different operations, Li said.

Monopolistic behavior

Correcting monopolistic behavior is Pan’s first point. In Ant’s statement, the issue is much less prominent, with only a mention of competition in a sub-points below the fifth point. Pan ties the monopoly issue to the “inappropriate links” we’ll see below.

Market dominance? According to iResearch, Ant Group accounts for more than 55% of the third-party digital payments market. By this measure, Alipay reaches the threshold to be classified as a dominant player in the sector, according to new regulatory definitions issued in January.

• It’s not illegal to be a dominant player. But the regulation calls for a review into the dominant players’ business practices to make sure you play fair.
• Its ubiquitous digital payments app Alipay had 1 billion annual active users as of the 12 months ending August 17, 2020.
• These users transacted a neat RMB 118 trillion in payment volume in the 12 months ending June 30, 2020.

Playing fair: The fintech giant also has to “correct unfair competition in its digital payments business and give consumers more choice in payment methods,” Pan said.

• Ant said that “returning to its origin, our payment business will serve consumers and SMEs by focusing on micro-payments and bringing them convenience.” Micropayments are low-value retail transactions.

Simplifying structure… a bit

Ant Group is hard to supervise, regulators have said. In part because its business cuts across different regulator’s territory, and in part because its operations are spread out across many subsidiaries. Reorganization will clearly define Ant’s different businesses to align with regulatory lines.

Another issue related to corporate reorganization is to bring Ant’s credittech operations under properly licensed subsidiaries. This is not directly addressed as a separate point in either of the statements, but both allude to it. Ant and Pan both mention a promise to set up a licensed personal credit reporting company. Ant also promises to place two major lending platforms in a consumer finance company.

What’s the issue? Ant Group is a very difficult corporate entity to wrap one’s head around, particularly its credittech operations. It does a lot of different things, both tech and finance, and has many corporate entities. It is very difficult to discern which company does what.

• The company’s microlending business is currently divided into a few different subsidiaries, according to its IPO prospectus. Two are “dedicated to technical services”: Ant Zhixin in Hangzhou and Chongqing Wantang. Ant Shangcheng and Ant Small and Micro Loan, both registered in Chongqing, are used to “fund a small portion” of the microloans enabled through Ant’s platforms.
• The two microloan companies that actually fund loans are able to operate nationwide because Chongqing municipality allows fintechs that have set up shop there to offer their services in the rest of China.
• Sesame Credit, a fully owned subsidiary, has been a licensed corporate credit reporting company since 2016.

LISTEN MORE: China Tech Investor: Ant Group is really big, and really confusing

Now what? The plan will set up “clearer boundaries between different regulated entities under the financial holding company,” Jun Wan, a lawyer who specializes in fintech at Han Kun Law Offices in Shanghai, told TechNode.

• Reorganization “does not mean that Ant has to be broken up,” Li said. The plan “implies that Ant will set up different licensed subsidiaries under the same financial holding company,” the Jiaotong University professor said.
• Ant Group started the process to set up a Chongqing subsidiary dedicated to consumer finance in August 2020, and got the green light from the China Banking and Insurance Regulatory Commission in September 2020, its prospectus said, but didn’t give any details as to what happened since.

Data

Pan demanded that Ant “break the data monopoly.” Ant, in its own second point, offered a promise to return Alipay “to its origin… by focusing on micropayments,” which could mean less focus on data. Both referred to regulations on personal credit reporting companies, specifically in regards to data management.

In the pre-rectified Ant Group, data was like the family fridge: Alipay put food in, and other units like Huabei and Jiebei could take it out as needed. It was not clear to outsiders who was using what data for what purposes.

In its prospectus, the company said it limited access to personal data “based on necessity,” and that it maintained “strict control over access to personal data and strict assessment and approval procedures to prohibit invalid or illegitimate uses,” and “records of data access.” “We limit any access based on necessity and maintain records of data access.”

The rectified Ant will manage data more like a cafeteria: If Huabei is going to use Alipay data, it will have to track what it takes and get a receipt. There will be rules—overseen by regulators—about what data it can transfer, for what use, and how, but we don’t know much about what these rules will be.

Data management is a regulatory priority in general, and particularly for the regulators on Ant’s case. “The regulators keep focusing on personal information protection given Ant collects a huge amount of personal information. It may require Ant to follow the strict personal information protection laws and regulations when collecting the personal information,” Wan said.

Data mixing: Ant uses data from Alipay and Alibaba to assess the credit risk of potential borrowers for its microlending businesses. Regulators seem to be concerned both that the company’s monopoly on payments data gives it an unfair advantage over rivals, and that the way it uses the data threatens user privacy.

• Access to user data is crucial to one of the unique aspects of Ant’s credittech business: Unlike banks, Ant can perform risk assessments for consumers and SMEs with little to no credit history.
• The company described its credit risk assessment process in its IPO prospectus: “Based on customer insights and risk rating in terms of spending, assets, liabilities, occupation, and other parameters such as financial stability, we categorize all Alipay users into different risk categories. […] By leveraging our dynamic risk management systems and extensive and real-time customer insights across different consumption scenarios, including those on Alibaba’s platforms, we have constructed comprehensive customer profiles, which feed into our dynamic credit risk assessment system.”
• In a speech at the Bund Summit on Oct. 25, 2020, Jack Ma argued: “We must use today’s technological capabilities to replace pawnshop thinking with a credit system based on big data.”
• Ant also uses its “unparalleled customer insights” to serve investment and insurance products to consumers, its prospectus said.

New rules on data soups: In his interview, Pan said that Ant will have to abide by the “’credit reporting industry management regulation’,” a 2013 regulation on the credit risk assessment industry. The 2013 rules were updated in January.

• In January, while Ant’s rectification plan was being negotiated and drafted, the State Council updated the 2013 regulation on the credit reporting industry. The new administrative measures have yet to be finalized and implemented.
• The measures will guide how the 2013 law is implemented and, according to some legal commentators, clearly extend it over tech companies.
• The rules are still in the pipeline, and much is left up to interpretation (in Chinese).

Data walls? Under most extreme reading of the administrative measures, it could be that Ant will no longer be able to use data from Alipay to perform credit risk assessments for its microlending products.

• Soochow Securities, a Shanghai-listed financial services firm, said in a report that the measures won’t allow internet platforms like Alipay to both attract hordes of borrowers and perform credit risk assessments. As the measures are implemented, the two functions will have to be separated.

Porous walls: It’s more likely that the data flow will continue, with more oversight: This could have serious implications for Ant’s credittech business model: It likely means that it will have to pass through regulatory hurdles to use customer transaction data from Alipay to conduct credit risk assessment, experts told TechNode.

• The rules don’t prohibit credit-reporting agencies from working with other companies, like Alipay, to collect data. But they have to report to the PBOC when they do so, and only work with licensed information providers.
• “Ant may still be able to use relevant data from Alipay,” but it will have to follow rules on how to do that, Wan said.
• Ant might have to limit the amount of data it collects to perform credit risk assessments. The proposed measures require companies to minimize their data collection to what’s necessary.

Some say Ant may have to share data. The 2013 regulation also proposed a nationwide data platform where credit reporting agencies contribute data. But the platform never got traction.

• Data monopolies are the crux of the anti-competitive behavior that big tech companies exhibit, several experts wrote in November 2020.
• Li understood Pan’s data monopoly remark to mean that “Alipay may misuse the market power and data collected from the Alipay platform to discriminate against certain types of consumers or small merchants.”
• The new measures reiterated the need for a platform, but didn’t make it mandatory. Ant could also be asked to share credit assessment data with other platforms.
• The Financial Times, citing anonymous sources, reported Friday that the PBOC is pushing for Ant to give control of its data to an external, state-owned company.
• Legally, it’s not mandatory: Ant will “not be required to share all the credit risk data through a national database,” Wan said.
• The database, under the supervision of the PBOC, didn’t get traction, in part because tech companies refused to share data on it.
• If Ant has to share its data with other companies, its valuation will be significantly lower, wrote Wang Shuai from the Oxford-Hainan Blockchain Research Institute.

Ant Group nests

Under the monopoly issue, Pan also brought up “irregularities such as nesting credit business in the payment link.” Ant didn’t make any direct mention to “nesting” in its statement.

Embedding links: Alipay often advertises Ant’s microlending products on its payment success notices. It also gives users the option to pay using its native products, be it a microloan or a money market fund, as well as the user’s linked debit cards. But Alipay doesn’t give users the option of paying using other tech giant’s options.

• Regulators have been complaining about such practices, which they call “nesting,” since 2019. PBOC deputy governor Fan Yifei said that this “cross-nesting” of microlending and digital payments forms a “closed loop” that spreads risk through the market and is hard to supervise.

No nesting: Pan specified that “nesting credit business in payment links” is an “irregularity” that will be rectified. This will likely stop, reducing Ant’s ability to market loans to Alipay users.

• Ant’s statement gave little in the way of clarification: The company said its two microlending platforms will be under the consumer finance company, and that Alipay will “return to its origin… focusing on micropayments.” This phrase has been used by regulators since at least September 2020.
• Inappropriate links “refers to the operation that Alipay embedded the Huabei as one payment option, instead of setting up a separate credit-card type service,” Li said.
• Soochow Securities expects that this will limit the growth of Ant’s microlending business, because it won’t be able to attract new borrowers from Alipay.
• When asked about whether this means that the Alipay app will have to be broken up, Wan said it’s still unclear. To the best of our knowledge, regulators have never mentioned breaking up the company in public.

Liquidity risk

Finally, Pan called on Ant to manage liquidity risk, particularly in its money market fund (MMF) Yu’ebao. Ant said only that it would“strengthen risk prevention,” and did not mention Yu’ebao.

Does Yu’ebao have a cash problem? Liquidity for money market funds has been a regulatory issue for a while.

• Regulations on money market funds implemented in 2018 set new liquidity ratios. Back then, Yu’ebao was China’s biggest money market fund.
• At the time, Chinese media reported that Tianhong Asset Management, the Ant affiliate that manages Yu’ebao, did not meet the requirements.
• Today, Yu’ebao’s total balance is falling, as are its yields. The total balance of Yu’ebao fell below RMB 1 trillion in Q1 2021, Tianhong’s report said. The money market fund lost its spot as China’s biggest.
• Tianhong said that average residual maturity of its portfolio assets is 57 days, and that it maintains a high ratio of cash to liabilities.

The liquidity plan: The company will “manage and control liquidity risk of its important fund products and reduce the balance of [its money market fund] Yu’ebao,” Pan said. Ant will need to raise liquid assets like cash, Li said, to be able to quickly meet short-term debt obligations.

• The decision to release pressure from Yu’ebao came as a surprise, Soochow Securities said in its report on the April 12 plan.
• Across its operations, Ant also has to “control high leverage and risk contagion” and “improve corporate governance,” Pan said.

What now?

The April 12 statements gave some clarity on what Ant will look like once it has been rectified: It will become a financial holding company with clearly delineated business operations. Alipay and Ant’s microlending platforms will be separated, but we don’t know if that will mean sleeping in separate bedrooms or a full-blown divorce.

Ant’s revamp is far from over. There will likely be more meetings and readouts, as changes to the fintech behemoth are negotiated and rolled out. Even the underlying laws and regulations are still in development. Basic issues are still undetermined, such as how will Ant’s credit risk assessment data practices change.

Whatever happens, it will set a precedent for other platform companies, especially in fintech.

As one banking and insurance regulatory official put it. The issues discussed in Ant’s meetings with regulators are “universal” to internet platforms. Other internet giants should watch closely.

China Tech Investor is a weekly look at China’s tech companies through the lens of investment. Each week, hosts Elliott Zaagman and James Hull go through their watch list of publicly listed tech companies and also interview experts on issues affecting the macroeconomy and the stock prices of China’s tech companies.

Make sure you don’t miss anything. Check out our lineup of China tech podcasts.

Recorded live on Clubhouse, Elliott chats with University of Hong Kong professor Angela Zhang about her new book “Chinese Antitrust Exceptionalism.” They explore the unique structural and cultural frameworks that distinguish China’s antitrust approach from that of other prominent nations, how China may use antitrust in its competition with the US, and what investors can learn from Ant Group’s halted IPO. 

Hosts may have interest in some of the stocks discussed. The discussion should not be construed as investment advice or a solicitation of services.

Watchlist:

• Tencent
• Alibaba
• Baidu
• Bilibili
• Xiaomi
• JD
• Pinduoduo
• Meituan-Dianping

Hosts:

• Elliott Zaagman– @elliottzaagman
• James Hull– @jameshullx

Guest:                   

• Angela Huyue Zhang – @AngelaZhangHK

Editor:

• Peter Isachenko

Podcast information:

• iTunes
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• Music: “Hey Ho” by Steve Jackson, Royalty Free Music

Chinese bike-rental firm Hello Inc has filed for an initial public offering in the US, Bloomberg reported, citing people with knowledge of the matter.

Why it matters: A survivor of China’s bike rental bubble, the Shanghai-based company is among the largest bike-rental firms in the country. If Hello successfully lists, it would be the first US-listed Chinese bike-rental company.

• Hello is signaling with the IPO—including the disclosures and accountability that come with a public listing—a shift to sustainable growth, following a backlash against bike-rental apps for breakneck but reckless expansion in earlier years.
• After multiple rounds of consolidation, China’s bike-rental market is now dominated by firms that are backed by deep-pocketed giants: Ant Group-backed Hello, Didi’s Qingju, and Meituan Bike, formerly Mobike.
• The company also operates electric bike-rental and ride-hailing businesses, all part of the “sharing economy” facing scrutiny as part of a broader regulatory tightening over China’s Big Tech.

READ MORE: INSIGHTS | The bike rental boom is dead. Long live bike rental

Detail: The company chose to file confidentially with the US Securities and Exchange  Commission, according to sources cited by Bloomberg, exercising an option that is becoming popular owing to the flexibility it allows for timing and pricing.

• Hello is working with China International Capital Corp., Credit Suisse Group AG, and Morgan Stanley for the listing, according to the report.
• The size of the targeted raise was not disclosed, though a previous IFR report said that the firm looks to raise as much as $1 billion, according to Bloomberg.
• A company spokesperson declined to comment on the matter when contacted by TechNode on Thursday morning.
• Hello had 400 million registered users as of October for its bike rental business which it operates in more than 460 cities. It rents out electric bikes in 400 cities and offers car ride-hailing services in over 300 cities.
• The company had 300 million registered users in 2019, when it said it was China’s largest two-wheel transportation app.

Context: Hello Inc. launched in 2016, two years after Mobike and Ofo, and quickly gained traction as the first bike-rental app to focus its business on China’s smaller cities.

• The firm, also known as Hellobike, Hello TransTech and Hello Global, merged with  Shanghai-listed competitor Youon Bike in October 2017.
• In addition to Ant Group, the company is backed by top investors including Fosun Group, GGV Capital, and Shenzhen Venture Capital.
• Companies within the broader sharing economy in China earned more than RMB 3.38 trillion ($519.6 billion) in transactions in 2020.

China Tech Investor is a weekly look at China’s tech companies through the lens of investment. Each week, hosts Elliott Zaagman and James Hull go through their watch list of publicly listed tech companies and also interview experts on issues affecting the macroeconomy and the stock prices of China’s tech companies.

Make sure you don’t miss anything. Check out our lineup of China tech podcasts.

In this episode, James and Elliott are joined by TechNode’s own Eliza Gkritsi. Eliza gives an update on how Ant Group’s fate may change as a result of new regulations. She also gives her takeaways at this current point of China’s digital currency rollout. The conversation also touches on China’s crypto-mining industry, and the rig-makers who have been benefiting from Bitcoin’s latest bull run.

Hosts may have interest in some of the stocks discussed. The discussion should not be construed as investment advice or a solicitation of services.

Watchlist:

• Tencent
• Alibaba
• Baidu
• Bilibili
• Xiaomi
• JD
• Pinduoduo
• Meituan-Dianping

Hosts:

• Elliott Zaagman– @elliottzaagman
• James Hull– @jameshullx

Guest:                   

• Eliza Gkritsi – @egreechee

Editor:

• Peter Isachenko

Podcast information:

• iTunes
• Spotify
• RSS Feed
• Music: “Hey Ho” by Steve Jackson, Royalty Free Music

Tencent’s WeBank and Ant Group’s MyBank will be the first two privately owned banks to participate in digital yuan trials, Chinese media reported.

Why it matters: The two online banks will be the first fintech companies to participate in the tests, possibly gaining an edge over their competitors despite widespread speculation that developing the currency was in part to curb their influence.

• The report comes just weeks after Ant Group reportedly reached a deal with Chinese regulators to restructure its operations amid a crackdown on fintech and big tech.

Details: Under the supervision of the People’s Bank of China (PBOC), the two banks are preparing to join trials such as those already underway, which are run by six state-owned banks, China Securities Journal reported citing anonymous sources.

• WeBank and MyBank accounts will soon become available on the digital yuan wallet app, the report said. Much like Ant’s and Tencent’s respective digital payment apps, the e-CNY app works by connecting to different bank accounts and transferring money to the wallet.
• Zhou Xiaochuan, former PBOC governor who spearheaded China’s digital currency efforts during his tenure, stated that Ant and Tencent were involved in digital yuan trials in an op-ed published in Caixin earlier in February, based on a speech he gave in late November.

READ MORE: UPDATED: We got some digital yuan!

Context: Ant Group’s Alipay and Tencent’s WeChat Pay digital payment platforms account for a respective 56% and 38.8% of China’s digital payment market, according to a report from market research firm iResearch. Holding such portions of the market fulfill criteria for the pair to be considered a duopoly, according to draft antitrust rules released by the PBOC in January.

• The digital RMB will enable other players, including traditional banks, to compete with the two fintech giants.
• Ant Group and Tencent each hold around 30% share of their respective licensed digital banks.
• E-commerce giant and Alibaba rival JD.com has been a high-profile participant in the digital RMB trials, even funding a $4.6 million lottery to distribute the currency in Suzhou.
• Some Ant employees in Shanghai have reportedly been participating in digital yuan trials.

Updated: added detail about Zhou Xiaochuan’s statements.

Huawei is seeking approval from authorities to acquire licensed digital payment provider Xunlian Zhifu, Chinese media reported.

Why it matters: The telecommunications giant is the latest of China’s big tech firms to expand into the digital payment industry, just as regulators are trying to break Ant Group and Tencent’s duopoly in the market with new antitrust laws.

Staffing: In addition to acquiring the Shenzhen-based licensed payment provider, Huawei is recruiting a “large number” of digital payment-related positions, such as deposit management, clearance, and bank cooperation, Chinese media reported on Sunday citing anonymous sources.

The acquisition: Founded in 2013 by Huawei’s competitor ZTE, Xunlian Zhifu was issued a nationwide online payment license in 2014. ZTE sold 90% of its stake in the payment provider to a Shanghai-based holding company in 2016.

• Huawei has operated Huawei Pay, a payment service that uses Near Field Communication and has been built into its smartphones since 2016. But bank card provider China UnionPay is responsible for transaction processing.

Antitrust: Regulators have ramped up anti-monopoly regulation in the last few months, following the suspension in November of Ant Group’s mega dual listing.

• Ant Group accounted for 55.6% of China’s digital payment market and Tencent for 38.8% as of June 30, 2020, according to market research firm iResearch.
• The two companies fulfill the criteria of a duopoly in the third-party payment sector, according to a a draft regulatory definition released in late January.

READ MORE: New digital payment rules likely to hit Ant Group, Tencent

New entrants: Several internet companies bought licensed digital payment operators in 2020, including Pinduoduo in January, and Bytedance and Trip.com in September.

• Bytedance launched an in-app payment tool in domestic short video app Douyin in January. The TikTok operator also launched a lending app in 2019.

READ MORE: Bytedance unveils Douyin mobile payment tool to rival Alipay, WeChat

Ant Group has reportedly reached a deal with Chinese authorities to become a financial holding company, making it subject to bank-like capital requirements.

Why it matters: The restructuring is likely to ease regulatory pressure for the fintech giant, but could also drastically alter its operations and curb its rapid pace of growth.

Details: Ant Group will be putting all of its business into a financial holding company, including all of its non-financial technology operations, such as its blockchain platform AntChain, Bloomberg reported.

• Previous reports said that Ant initially tried to only relegate business units that fall under the purview of financial regulators to the holding company, including consumer and small- to medium-sized business lending, wealth and asset management, insurance, digital payments, and MYBank, its licensed bank.
• An official announcement could come before the Spring Festival holiday, which starts on Feb. 11.
• Regulators are still ironing out the exact requirements for financial holding companies, after announcing the corporate framework in September.
• An Ant Group representative declined to comment.
• Share prices in New York for its e-commerce affiliate Alibaba on Wednesday rose 3.5% on the news.

Context: Since the suspension of Ant Group’s highly anticipated blockbuster dual public listings, it has been facing intense regulatory headwinds as Chinese authorities move to rein in fintech giants.

• Just last week, Ant Group removed all bank deposit products from its platform to appease authorities which deemed them too risky.
• On Jan. 21, China’s central bank released new antitrust rules for third-party digital payments providers that will likely hit Ant, among other fintech companies.
• JD.com’s fintech arm JD Digits also restructured in January, but took a different approach: It joined the finance unit with its artificial intelligence and cloud businesses into a new company called JD Technology.

READ MORE: CHINA VOICES | The unsigned op-eds that foreshadowed Ant Group IPO suspension

Alipay, JD Digits, and Didi Finance have completely removed all interest-bearing time deposit products from their apps, just days after authorities released relevant regulations. TechNode has independently confirmed that bank deposit products have been banished from Alipay.

Why it matters: The move is the culmination of a month-long crackdown on time deposits sold through third-party fintech platforms, which is part of a wider regulatory clampdown on fintech as regulators try to rein in China’s Big Tech.

• China’s Banking and Insurance Regulatory Commission (CBIRC) said on Jan. 27 that it will further scrutinize the cooperation of banks and insurers with fintech companies.

Full measures: As of Dec. 27, Alipay, JD Digits, and Didi Finance closed the app portals through which users could increase their existing deposits with banks, Chinese media reported. The outstanding balances will be returned to their accounts once the deposits have matured.

Half measures: On Dec. 15, Sun Tianqi, head of the central bank’s financial stability department, likened the partnership between banks and fintech platforms on deposit products to “driving without a license” and warned that regulatory supervision would intensify.

• On Dec. 18, Ant Group was the first of China’s biggest internet platforms to stop selling bank deposit products on the Alipay financial marketplace. The company said it was following regulator demands.
• Tencent, JD Digits, and Baidu’s Du Xiaoman followed three days later.
• The relevant portals could still be accessed by app users who had purchased the time deposits in the past.
• The CBIRC completely banned on Jan. 15 the sale of bank deposit products, including fixed-time deposits, on third-party internet platforms.

The risk: Small regional banks had been advertising time deposits with interest rates as high as 7% through fintech platforms.

• Regulators have said that these banks are high-risk and use online platforms to pump liquidity on their balance sheets and release pressure from their liabilities, without going through the more stringent process of interbank lending.
• After the Jan. 15 rules were implemented, small regional banks are still allowed to sell time deposits, but they must use their own channels to advertise and sell. Xin’an Bank, Blue Ocean Bank, and Wuxi Xishang Bank announced that they are moving their time deposits to their own apps, the Global Times reported.

READ MORE: CHINA VOICES | The unsigned op-eds that foreshadowed Ant Group IPO suspension

The People’s Bank of China has proposed new antitrust rules for non-bank digital payment companies, which are likely to pressure the duopoly held by Ant Group and Tencent over the market.

Why it matters: The rules set the standard for monopolistic behavior in China’s third party digital payment market. If implemented, they are likely to trigger regulatory scrutiny of Ant Group and Tencent.

• The move is part of a wider regulatory antitrust clampdown on tech companies and particularly on fintech, but it is the first to target the digital payment sector.
• Sources have told TechNode that Ant Group and Tencent’s online payment duopoly does not sit well with banks and authorities, but there had been little to no regulatory movement to curb their power.

READ MORE: CHINA VOICES | The unsigned op-eds that foreshadowed Ant Group IPO suspension

Details: The new rules set market share thresholds for the “confirmation of market dominant position,” which might trigger a regulatory review. If non-bank online payment companies exceed these thresholds, the central bank will consult with the antitrust watchdog to determine whether the company or companies have engaged in monopolistic behaviors.

• For a single third-party payments provider, the market share threshold is half of the market; two-thirds of the market for two providers’ combined share; for three providers’ combined market share, the limit is 75% of the market.
• If one of the multiple-party payment providers accounts for less than 10% of the market, it will not be included in the anti-monopoly review.
• Ant Group individually and in combination with Tencent exceeds these thresholds. Ant Group holds 55.6% of China’s market for digital payments, and Tencent accounts for 38.8%, a June 30 report from market intelligence firm iResearch said.
• The rules also set early warning thresholds, which are lower than the “confirmation” thresholds, and might mean key personnel is called in for interviews.
• The draft rules are open for comment until Feb. 19.

Context: Regulators have been trying to rein in big tech in the last few years. Regulatory efforts have intensified, however, since Ant Group’s initial public offering in Shanghai was abruptly halted in November.

• Sweeping antitrust rules were released in the days following the Ant Group listing fiasco. Soon after, Alibaba, an SF Express subsidiary, and a Tencent-backed platform were fined for failing to report acquisition deals for antitrust reviews.
• The central bank released a technical document to standardize the use of AI and big data in payment risk prevention on Jan. 4.

TikTok’s Chinese owner has rolled out an e-wallet feature on its Douyin video-sharing app, a move that could pose a significant threat to the Alipay and WeChat duopoly in China’s mobile payment sector.

Why it matters: Douyin, the domestic version of TikTok, is one of China’s most used apps with 600 million monthly active users as of September.

• Bytedance’s ambition to tap into the payment sector have long been hampered by China’s strict finance regulations. The company in September inherited (in Chinese) a payment license from a small payment firm based in the central province of Hubei it acquired two years ago.
• E-commerce behemoth Alibaba’s Alipay and internet firm Tencent’s WeChat Pay, a feature inside the instant messaging app WeChat, are the two dominant players in the market. Together they hold nearly 95% of China’s online payment market, according to iResearch (in Chinese), a market research firm.

Details: Douyin recently added Douyin Pay onto its checkout page, Chinese media reported Tuesday. The payment method allows users to buy virtual gifts for livestreamers and pay for goods on the app’s e-commerce platform.

• Bytedance said in a statement to TechNode that Douyin Pay was rolled out by the company to “supplement the existing major payment options.” A Bytedance spokesperson said the feature had been available for a while and was previously in test mode.
• The app previously supported WeChat Pay and Alipay. Douyin Pay allows users to link cards from 10 banks including Bank of China and China Merchants Bank.
• Payments are processed by Ulpay, the Hubei-based firm it acquired in 2018.

Context: An in-house payment tool is essential to many of Bytedance’s offerings, including e-commerce and lending services.

• Bytedance is building an e-commerce platform on Douyin around its active livestreaming community. The business model, known as livestreaming e-commerce, has seen massive growth in China since 2019.
• The company in October 2019 launched a lending app, providing users with consumer credit, installment payments, and credit card services. Douyin had also recently launched Dou Fenqi (literally translated as Dou Installments), a feature that allows users to pay their bills in monthly installments, Chinese media reported.

Jack Ma made his first public appearance after months of avoiding the spotlight, following rampant speculation attributing his disappearance to a regulatory crackdown on his businesses.

Why it matters: Ma had not appeared in public since Oct. 25, when he made a speech at a gathering of China’s top financiers and regulators criticizing Chinese regulation on fintech. The speech reportedly contributed to the negative attention from regulators that led to the suspension of Ant Group’s initial public offering just days later.

• Ma’s reappearance will likely quell speculation that his disappearance was not a deliberate choice to lay low, but a sign that he might be arrested—or worse.
• The resurfacing follows just five days after China’s central bank said Ant Group had established a rectification team to work with regulators.

Details: China’s most recognized tech billionaire held a video conference (in Chinese) with 100 teachers in remote parts of China on the morning of Jan. 20.

• “When the epidemic is over, we will meet again,” Ma said in the video.
• The event to recognize rural teachers’ achievements is usually held in the city of Sanya, in China’s southern island province of Hainan, state media reported.
• At the time of writing, the hashtag “Jack Ma made his first public appearance” has been viewed over 1.3 million times on China’s Twitter-like social media platform, Weibo.

Context: Within a few days of the fateful Oct. 25 appearance, regulators in November halted Ant Group’s planned $35 billion listing on the Shanghai stock exchange and released new antitrust rules that severely curb the fintech giant’s operations, as well as those of its e-commerce affiliate, Alibaba.

• In December, regulators fined Alibaba, Tencent, and SF Express for failing to report acquisitions to China’s market competition authorities.
• Ten days later, they launched an antitrust probe into Alibaba over allegations of “forced exclusivity.” On the same day, the People’s Bank of China called Ant Group in for a meeting.

READ MORE: CHINA VOICES | The unsigned op-eds that foreshadowed Ant Group IPO suspension

China Tech Investor is a weekly look at China’s tech companies through the lens of investment. Each week, hosts Elliott Zaagman and James Hull go through their watch list of publicly listed tech companies and also interview experts on issues affecting the macroeconomy and the stock prices of China’s tech companies.

Make sure you don’t miss anything. Check out our lineup of China tech podcasts.

In this episode, James and Elliott review the winners and losers of 2020, what they got right and what they got wrong, as well as the lessons they learned. They also look forward to the rest of 2021, anticipating trends, as well as companies to watch. They discuss Bilibili, Alibaba, Ant, Xiaomi, Baidu, and more.

Hosts may have interest in some of the stocks discussed. The discussion should not be construed as investment advice or a solicitation of services.

Watchlist:

• Tencent
• Alibaba
• Baidu
• Bilibili
• Xiaomi
• JD
• Pinduoduo
• Meituan-Dianping

Hosts:

• Elliott Zaagman– @elliottzaagman
• James Hull– @jameshullx

Editor:

• Peter Isachenko

Podcast information:

• iTunes
• Spotify
• RSS Feed
• Music: “Hey Ho” by Steve Jackson, Royalty Free Music

Digital yuan progress

• Ant Group employees can use the Alipay app for digital yuan transactions in select locations, including the Lujiazui district in Shanghai. The fintech giant is working with the People’s Bank of China to develop infrastructure to support the digital currency. (Mobile Payment News, in Chinese)
• The Industrial and Commercial Bank of China, one of the country’s big four banks, is accepting applications from customers in Shenzhen who want to open digital yuan wallets. (China Banking News)

Chinese miners in Iran

Iranian authorities halted all cryptocurrency mining operations operated by Chinese people on Jan. 14. Chinese crypto entrepreneurs flocked to Iran during the Bitcoin surge to take advantage of its cheap electricity.

An Iranian tech entrepreneur, Nasim Tavakol, tweeted on Jan. 8, “The Chinese have built a 175 MW bitcoin mining farm in the Rafsanjan Special Economic Zone,” (translation via Twitter), and added the mine’s coordinates. (Wu Blockchain, in Chinese)

More interoperability

Binance and Poly Network are launching cross-chain interoperability. Binance Smart Chain, the cryptocurrency exchange’s decentralized finance-oriented public blockchain, and Poly, founded by Neo’s Da Hongfei, are the latest two blockchain projects to try cross-chain transactions and data exchange.

READ MORE: Binance, Poly Network to launch cross-chain interoperability

Conflux lands $5 million grant

Public blockchain startup Conflux landed a $5 million research grant from the local government in Shanghai’s Xuhui district. Conflux is one of few decentralized chains to work with Chinese authorities. It received funding from Shanghai authorities in 2019 for a research lab, and scored a contract to revamp government data architecture in Hunan province in August 2020. (CoinDesk)

READ MORE: Public blockchain Conflux lands second government deal

Alibaba founder’s empire facing scrutiny

• Chinese market regulators announced on Thursday an investigation of Chinese e-commerce giant Alibaba for anti-competitive practices. (TechNode)
• On the same day, regulators called in executives at Alibaba’s fintech affiliate Ant Group for a meeting about regulation compliance. (TechNode)
• China’s market watchdog summoned on Dec. 22 six of China’s largest consumer internet businesses, including Alibaba, Tencent, JD.com, and Meituan, for a meeting about tightening control over community group buying. It warned the firms about predatory pricing and selling counterfeits. (The Wall Street Journal)

Luckin’s rising revenue

A recent report submitted by Luckin Coffee’s liquidator to a Cayman Islands court offered a glimpse into the troubled coffee chain’s finances. Reeling from its sales fraud, ensuing Nasdaq delisting, and impact from the pandemic, Luckin reduced its store count 13.5% to 3,898 as of the end of the third quarter from 4,507 in end-2019.

Luckin Coffee earned RMB 1.15 billion ($176.3 million) in Q3, a 35.8% increase over the same period a year earlier. In Q2, revenue grew 49.9% year on year to RMB 980 million, while Q1 revenue—prior to its fraud admission—totaled RMB 565 million, 18.1% higher than the same period a year ago. Customer growth and purchase frequency powered growth, according to the company.

Luckin Coffee agreed earlier this month to pay a $180 million penalty to settle accounting fraud charges brought by the US market regulator. (Pandaily)

Edtech firms cash in

• Chinese edtech unicorn Zuoyebang announced Monday the completion of a more than $1.6 billion round from investors including Alibaba Group and SoftBank’s Vision Fund, as well as existing investors Tiger Global and Sequoia Capital China. The funding comes six months after a $750 million Series E received in June this year, raising the company’s total funds received to over $3.4 billion. (Reuters)
• Yuanfudao, another Chinese edtech firm, secured $300 million from Jack Ma’s Yunfeng Capital. This is the company’s third funding round received this year, following a $1 billion G1 round in March and $1.2 billion G2 round in October. (KrAsia)
• TAL Education, a K-12 after-school tutoring services provider in China, announced on Tuesday a $3.3 billion private placement plan led by tech venture capital firm Silver Lake. The private placement will account for a combined 6.5% of the company’s outstanding shares. (TAL)
• Zhangmen, a Warburg Pincus-backed Chinese online tutoring platform, is reportedly seeking to raise $300 million in a US stock market listing. (Bloomberg Quint)
• Xuebajun, an K-12 education app that received $200 million in funding since its establishment in 2013, is reportedly insolvent. Nearly 10,000 employees and teachers are owed payment and 100,000 users, who pre-paid for their services, have been affected, a self-identified employee of the company said in a WeChat post. The company has not officially filed for bankruptcy. (Sina, in Chinese)

Supermarkets and tech

• The average daily orders from Sam’s Club‘s nearly 100 warehouses in China have increased more than 10-fold in the three years since the American membership-only retailer entered into a partnership with Chinese grocery delivery platform JD Daojia. JD Daojia provides one-hour delivery to the wholesaler’s online orders. (Dada, in Chinese)
• Walmart, the supermarket chain behind Sam’s Club, hosted on Dec. 18 a one-hour livestream on TikTok, where users can purchase products featured by the livestreamers without leaving the app. (TechCrunch)

Fintech giant Ant Group has been called in for a meeting with financial regulators, China’s central bank announced today, the same day that market regulators announced an anti-monopoly probe into sister company and e-commerce giant Alibaba.

Why it matters: This is the first publicly announced high-level meeting between regulators and Ant Group since the fintech giant’s IPO was abruptly suspended, days after another similar meeting.

• The company has been under regulatory pressure as China’s authorities tighten the screws on fintech, who are concerned that unbridled tech giants bring systemic risk to the economy.

Details: “In the coming days,” the Alibaba affiliate will be “interviewed” (our translation) by the People’s Bank of China (PBOC), the Insurance and Banking Regulatory Commission, the China Securities and Exchange Commission, and the Foreign Exchange Commission, the PBOC said in a statement this morning.

• Authorities will also “urge” Ant Group to comply with regulatory financial, antitrust, and consumer protection requirements, the notice from the PBOC said.
• Ant Group responded to the news just ten minutes after the central bank’s announcement with a post on its official WeChat account, say that it will “seriously study” and “strictly comply” with regulatory requirements.
• At the same time, Alibaba is trying to satisfy regulators concerned about its market power in an investigation into accusations of monopolistic behavior.

READ MORE: China launches anti-monopoly investigation into Alibaba

Context: On the same day that Jack Ma met with regulators, Nov. 2, new rules on microfinancing were released. Credittech makes up around 40% of Ant Group’s revenue, according to its IPO prospectus.

• On Nov. 3, the Shanghai Stock Exchange suspended Ant Group’s hotly anticipated $34 billion IPO, saying that the company didn’t meet disclosure requirements about regulatory risk.
• Since, Ant Group has made changes to its operations. Just yesterday, it lowered credit limits for younger users of its Huabei microlending platform. Last week, it stopped providing bank deposit products on Alipay.
• New draft antitrust rules were released on Nov. 10 by the State Administration for Market Regulation. Alibaba, Tencent, and and SF Express were fined over anticompetitive behavior on Dec. 14.
• Earlier in December, Guo Shuqing, the head of the China Insurance and Banking Regulatory Commission, called for more national level regulations on fintech.

READ MORE: CHINA VOICES | The unsigned op-eds that foreshadowed Ant Group IPO suspension

Chinese market regulators announced an anti-monopoly investigation targeting Chinese e-commerce giant Alibaba Dec. 24. The same day, they summoned executives at affiliate Ant Group for a meeting about regulation compliance issues.

Why it matters: An investigation targeting Alibaba, a bellwether of China’s tech sector, highlights the country’s latest efforts to curb anti-competitive practices by China’s largest tech firms, which were practically “immune” to such regulations before.

READ MORE: China’s tech firms aren’t ‘immune’ to antitrust any more

• Chinese government previously adopted a laissez-faire attitude to the sprawling growth of Chinese tech companies like Alibaba and Tencent’s walled-garden empires. With a series of recent moves, Beijing is moving to clamp down on monopoly behavior and enforce increasingly stringent market and financial regulations.

Details: The State Administration for Market Regulation, China’s top market watchdog, said in a Thursday morning statement (in Chinese) that it has launched an investigation into accusations of monopolistic practices at Alibaba.

• The announcement didn’t offer much detail about the process and scale of the investigation, but named “forced exclusivity,” a practice in which platforms force sellers to use only one company’s platform or services, as a key focus of the investigation.
• Alibaba says in a Thursday response that it will “actively cooperate with the regulators on the investigation,” emphasizing that its business operation are continuing as normal.
• Alibaba’s Hong Kong shares dropped 8.1% on the news in Thursday trading.
• Over the coming days, sister company and fintech giant Ant Group will be meeting with top finance regulators in a parallel challenge to its dominance.

READ MORE: Ant Group to meet regulators ‘in the coming days’

Context: Alibaba has been in a years-long public spat over the subject of “forced exclusivity” with upcoming rivals like JD, Pinduoduo, and Meituan.

• Alibaba’s PR head Wang Shuai dismissed concerns over the matter last year, stating that “so-called forced exclusivity is a non-issue,” and arguing that criticism was a tactic used by rival platforms to lash out at competitors and whip up negative public opinion.

Our regularly scheduled column is having a week off. In its place, may we recommend a look at the TechNode archives? Our suggested topic: P2P lending.

The peer-to-peer lending fad is something a lot of China tech has tried to forget, but, as TechBuzz China’s Rui Ma wrote recently, you can’t understand what’s happening with Ant Group and fintech regulation without it.

The online P2P industry went from the launch of pioneer platform PPDAI in 2007 to the near-total ban of the industry in 2019, leaving behind a trail of angry and duped investors. The decision to put Ant under strict new regulations—forcing it to drop its IPO and drastically changing its business model—likely reflects fears of the consequences of letting finance grow faster than oversight.

Clearly, regulators are once burned, twice shy. But does Ant really have anything in common with the industry a senior police official later called “a disaster zone of fraud”? We’ll be back next week to examine that question with a look at the financial issues in play with new regulations on fintech.

TechNode covered the story from start to finish. Here’s a timeline of the best of our coverage:

P2P lending: 2012-19

• Nov 27, 2012: “2000 peer-to-peer online funding services in China, unregulated”
  When we first looked at the industry, it was growing fast: “Over 2000 online peer-to-peer funding services reportedly have processed RMB 20 billion ($323 million) worth of transactions in this year, twenty times of that in last year.” But the risks were already apparent, with thousands of unregulated companies taking investors’ money—and a few already charged with fraud.
   
• Jul 31, 2013: “Lending Club co-founder established Shanghai-based P2P funding service Dianrong”
  The next year, we first met industry leader Dianrong, and its pedigreed founder Soul Htite—also of the US forerunner Lending Club. But Dianrong, he told TechNode, was uniquely Chinese, not just a local version of Lending Club.
   
• Jun 24, 2014: “P2B is becoming the favorite online lending model of Chinese VCs after P2P heat ebbs?”
  By 2014, P2P lending had already acquired a shady reputation, leading some to rebrand as “P2B”—peer to business. But the sales pitch—directing capital from ordinary investors to efficient but under-capitalized SMEs—was much the same as earlier P2P players.
   
• Aug 18, 2014: “[TechCrunch Beijing] Lending Club, Dianrong cofounder Soul Htite: P2P industry to be regulated in future 3-4 years”
  Industry leaders remained confident. Dianrong boasted average returns over 14%, with only a 1.27% rate of defaults. One advantage, Htite said, was the responsible Chinese consumer: while Americans frittered borrowed funds away on “attending parties,” Chinese consumers invested it in education.
   
• Jun 29, 2015: “More challenging, greater impact: Lending Club/Dianrong founder on China”
  Soul Htite was a star, explaining his secrets to success. In 2015, Dianrong struck a deal with Alibaba’s Sesame Credit to share credit information, and told TechNode “I love Chinese food and steamed buns are my favorite.”
   
• Aug 20, 2015: “[Update] China’s P2P lending site Dianrong lands massive $207 million Series C backed By traditional banks”
  Investors were convinced—and money flowed into Dianrong throughout 2014-16 from blue chip backers including Standard Chartered Bank and Tiger Global Capital.
   
• May 27, 2016: “Chinese P2P lender closes, executives detained as industry struggles with fraud”
  By 2016, it was clear the industry had some very bad actors. In January, major platform Ezubao turned out to be a Ponzi scheme. Twenty-three executives were arrested and  accused of stealing billions. In May, police in the southern city of Huizhou shut down another platform, Esudai, and arrested 13 executives, accusing them of “absorbing” hundreds of millions of RMB. Still, many remained bullish, viewing the arrests as natural winnowing of the market.
   
• Mar 10, 2017: “A brief look at the current state of China’s P2P lending industry”

China is facing two extremes of P2P platforms going up and down: record-breaking funding rounds (Lufax, $10 billion) and record-breaking Ponzi schemes (Ezubao, $7.6 billion).

Despite the concerns, it is hard to forecast a sudden downfall of P2P platforms in a country where outstanding loans totaled RMB 816.2 billion at the end of December 2016 from P2P lending platforms alone. Using those platforms have already become a habitual thing for Chinese public, especially those who don’t fall into China’s traditional banking categories.

• May 12, 2017: “China’s average P2P investors are becoming the opposite of what you’d expect”
  Indeed, 2017 saw confidence in the industry rise: average contributions by investors increased, while the platforms’ user base broadened, adding more female, young, or rural users.
   
• Aug 2, 2018: “The rise and fall of China’s online P2P lending” 
  [Editor: Recommended—if you read one piece on P2P lending, make it this one!]
  
  2017 was the last hurrah for P2P. By 2018, it was a national scandal, with investors who’d lost money in platform collapses demanding justice. In the face of public anger, regulators opened a “rectification campaign” in late 2017, giving P2P platforms until June 2018 to get in shape. Instead, hundreds defaulted on their obligations, causing losses—and anger—to spread.

Some of them protested in front of police stations and chanted the Chinese national anthem March of the Volunteers, trying to pressure the authorities. Some of them organized online investor rights groups, making a collective effort to get back the money. They’ve made headlines of domestic media and sparked intense online debates on who will be responsible for the loss and where the industry is heading.

•  Jan 31, 2019: “China’s P2P lending sector a ‘disaster zone’ of fraud: government official”
   
• Feb 21, 2019: “China’s online P2P lending industry is undergoing a massive shake out”
  In 2019, defaults multiplied under regulatory pressure—by the start of 2019, almost 5,500 platforms had collapsed, wiping out over RMB 177 billion in investments. Even industry leaders—including pioneer PPDai and Ping’an’s Lufax—began pivoting to other markets. Others tried to escape to Southeast Asia. Still, our sources told us that “consolidation” would winnow the field to a few entrenched industry leaders.
   
• May 9, 2019: “INSIGHTS: P2P lending in crisis as regulatory bubble pops”
  But by May, we could read the writing on the wall. Regulators were moving in for the kill.
  
  One moral: TechNode called the story a “regulatory bubble.” The industry grew faster than markets would have predicted, driven by the irrational exuberance of local governments; when it started to go bad, regulators sped up the process by culling companies.
   
• Aug 22, 2019: “P2P lending platforms feel the pressure as regulators squeeze them out of the market”
  Hebei regulators told hometown giant Fincera to stop making loans in the province. The company was forced to auction off the tallest building in the province and move to Beijing, while complaining of “continuous unfounded opposition” from once-friendly provincial authorities. A battered Dianrong managed to raise an undisclosed sum of money to meet new reserve requirements, despite closing 60 of 90 brick-and-mortar lending outlets and laying off some 2,000 employees.
   
• Aug 27, 2019: “Don’t blame internet finance for all of the problems in P2P lending: Jack Ma”
  P2P? Who, me? Clearly, the Ant founder recognized that the association was not good for the brand.

“P2P lending was not internet finance from the start. It is just an industry of illegal financing businesses that have websites. We shouldn’t blame the problems all on internet finance. Of course, internet finance still has a lot of room for improvement.”

—Jack Ma, chairman of Alibaba

• Nov 4, 2019: “P2P platform operators urged to exit as regulators mull next clampdown phase”
  On Nov. 1, Shanghai told the 40 platforms left in the city—including many of China’s largest survivors—that it was time to shut down, following similar actions by Shandong and Hunan provinces. A few days later, national regulators encouraged companies across the sector to follow suit. The story of P2P lending appeared to be over.

Haunting the fintech industry

Was P2P always doomed? From the start, we could see that the industry was under-regulated: thousands of companies got into the game with little to no oversight, many scammers among them; others simply managed their finances imprudently. But if you asked Dianrong or Fincera, they said they got a bad rap: once regulators lost faith in P2P lending, they raised requirements so high that even good platforms couldn’t survive.

The industry has left a legacy, introducing many consumers to micro-borrowing for the first time, and helping to pave the way for routine borrowing to fund consumption—it helped build the market that Ant is now making billions from. But it is remembered chiefly as a cautionary tale.

For regulators, it’s a lesson about the risks of letting markets run wild. For investors, it’s a lesson that what’s booming today could be illegal tomorrow.

The Ant Group IPO suspension is one of the biggest stories of 2020. TechNode editors have selected this article as one of our favourite longform analyses. Let us know if you would like to see more content like this.

Timeline

• Aug. 25: Ant Group files for IPO on the Hong Kong Stock Exchange in the world’s largest expected offering. Dual listing expected on the Shanghai exchange.
• Oct. 24: Jack Ma gives speech at Bund Summit; Ant Group IPO pricing is determined.
• Nov. 2: Jack Ma and Ant Group management summoned for meeting with regulators; new draft regulations on microlending released.
• Nov. 3: Ant Group IPO halted on both HKSE and SSE.

The product

Of these, we can neglect the Investment and Insure segments for now, because they are small and because they don’t pose a much of a “risk” problem. (They still can, as we saw in the case of Yu‘ebao imposing deposit and withdrawal limits so as to maintain stability and manage liquidity, but that was not an indictment of the product logic itself, more of a testament to Alipay’s distribution power, and unlikely to be on the level of “taking the entire economy down with it.”) 

The important thing is that the revenue split of the business went from primarily payments (55%) to more Credittech in the span of three years, while growing at a clip of 30% per year on the overall business, which is on track to be more than $20 billion this year. Just over half of that growth has been contributed by the now largest Credittech business, which more than tripled in the last three years.

The Credittech business consists of two main products: Huabei and Jiebei, which mean “just spend” and “just borrow”, respectively, are Ant Group’s versions of the credit card and the small loan. Huabei is already the largest consumer credit line product in China, and it offers an annualized interest rate of a bit over 15%, the max under new rules by the Chinese government to cut down “usurious loans.” Jiebei is the same. 

Together, they served over 500 million users in the last twelve months. Let that sink in for a second. Since these products are only available to Alipay users, which has annual active users of a billion, this means that half of all Alipay users used some kind of Ant Group credit or debt product in just the last year, but it also means that half of all internet users in China, period, used Huabei or Jiebei in the last year.

The context

Now, of course Huabei is a short-term credit product with an average outstanding balance of $300, so even if we’re looking at all 500 million people using it, so what? you say. Well, it’s not a problem until you look at the real distribution of Chinese incomes. As all of you long-term Tech Buzz listeners know, there are (at least) two Chinas, and the urban globe-trotting, latte-sipping, luxury-goods-addicted population gets disproportionate air time in the West. 

But most people (read: something like 1 billion people) have annual household incomes of less than $15,000.  In fact, the average real disposable income is less than $300 per month for two-thirds of Chinese provinces as of 2015. Sure, the population is mostly concentrated among the ten or so coastal provinces and municipalities directly under central government control a la Shanghai and Beijing, but you see the problem here.  Even a measly $300 of credit is a lot for many parts of China. There is real concern that Ant Group’s products are reaching beyond the “creditworthy” and going well into the “subprime.” 

When I say concern, I’m not talking about the business-level impact—which let’s assume Ant Group’s excellent finance and legal teams can manage—but the social backlash against such products in general. There’s a reason why the Ant Group IPO halt was mostly applauded by netizens in China.  Most people considered these digital credit products a form of “predatory lending.” They were increasingly uncomfortable with the way these products were being advertised and “force-fed” to everyone, especially the most vulnerable. Ant Group was not the only or worst offender. It was the entire industry.

There’s a few background points you should understand about the consumer finance space in China. Credit cards are very new (fewer than 500,000 existed in 2002) and grew quickly, but still only one-fifth of the population has one. In fact, as of 2015, 60% of Huabei’s customers have never used a credit card. And while there’s been a lot done to foster inclusion, there’s still the fact that credit can be difficult to come by for many, especially those just starting out. 

Which is why Ant Group’s assertion in its prospectus that “a typical Huabei customer is young and Internet savvy but has unmet consumption demand due to the lack of a credit card or insufficient credit limits” is a double-edged sword. Of course more credit, especially when made available at the point-of-sale as Ant Group’s products often are, is both a great growth hack and welcomed by consumers for the convenience factor. 

And let’s suppose for a moment we don’t believe that there is any problem with the way Ant Group assesses credit risk. There is still the problem that that’s not how the Chinese public sees it. Maybe it’s because they’re new to debt, but a great number of Chinese people see the issue to be more and more young people spending themselves into ever deeper debt and ruining their future. It’s a popular viewpoint that’s not just confined to millennials and older.  

The precedents

This is because pretty consistently over the past few years, there’s been a whole spate of issues when it comes to unregulated (or not well-regulated) lending businesses in China. Two episodes have been especially traumatic. One is the P2P lending fiasco we talked about in Episode 76 where a lot of people lost a lot of money (estimate: $115 billion) to dishonest or inexperienced operators. The government finally shut the whole thing down late last year, after repeatedly trying to regulate the industry and failing. 

Of course, it didn’t help that some contained state-backed funds, and were presumed to be “safe” by folks such as this lady, who killed herself out of despair after losing all her savings. The second are the university lending scandals which resulted in students committing suicide when they could not deal with the mounting levels of debt they had accumulated, often compounded by the inhumane way in which collectors were blackmailing them, i.e., threatening to make public nude photos that the female students sent in as collateral. 

To many people, these crises, both of which took several years to resolve and are still fresh wounds, shattered their confidence in the ability of lenders or lending platforms to rein in their greed, even at the expense of real lives lost. 

This was corroborated by the platforms’ own actions.  As the P2P fiasco showed, wherever there is opportunity, thousands will swarm in. E-commerce players such as JD had long followed Ant Group’s lead (last month I wrote about how JD Digits filed for IPO soon after Ant Group), and of course Baidu and Tencent are among the leading players. But Meituan, Didi, and even Weibo have jumped in head first.  

Sina Weibo even had a promotion where it was advertised that folks who borrowed money on the platform would get their likes counted multiple times. That wasn’t strictly true but it got people furious at the platform for targeting young fans who were often part of communities that already spent too much money and time trying to get their favorite celebrities trending (another extremely controversial activity I’ve written about on Extra Buzz). And now they were going to go into debt for it! 

And that’s a huge difference between P2P and microlending.  P2P, for the most part, was not taken on seriously by the internet giants in China. Their vast distribution networks were primarily being leveraged for advertising purposes, not actual lending. Not so for microlending. To the people, it was as if, instead of here in the US where Google has moved to ban payday loan ads, Google decided to sell payday loans themselves. The internet giants, each with a few hundred million DAU, were going after the lending business under the guise of being a big data provider, and doing so with very little oversight. 

The backlash

If you were on the ground in China, this would’ve been obvious. Ads were plastered everywhere. “Even on bus station terminals,” was a common complaint I read online and heard firsthand, implying that they didn’t think bus-takers could afford to live with debt.  There were lots of spam phone calls and texts. If you open up any short video platform this year, you’ll be bombarded with ads or sponsored content that basically tells you you’re an idiot if you don’t borrow as much as you can (in Chinese).

In early October, when one Huabei commercial implied that a working-class father should use his credit advance to give his daughter a “presentable birthday,” the internet erupted in fury. Three weeks ago, Li Xueqin, a female standup comedienne phenom, made a viral joke where she planned to buy the entirety of Alibaba for Singles Day by borrowing funds on Huabei. Obviously, this makes no actual sense, but its popularity is just one more indication that the public had thought debt-fueled consumerism was getting out of control to the point of utter absurdity. 

Of course, this is not to say that there weren’t folks who were on Ant Group’s side.  As we covered on Tech Buzz, there is indeed a dearth of financing opportunities available to some very deserving borrowers, especially small businesses, a problem that has been highlighted for years. Jack Ma was not wrong that many parts of the Chinese banking system, with their “pawnshop mentality,” were not equipped to deal with them.  But the 20 million small businesses borrowers only make up a minority (20%) of Ant Group’s loans outstanding. And there was middle ground: You could criticize the banks and appreciate Ant Group’s existence but still believe it needed to be reined in … There is a balance. And I think this is exactly what happened.  

The speech

Let’s go back to Ma’s ill-fated speech at the Bund Summit in Shanghai on October 24, the gist of which I translated here. Effectively, he crucified regulators for being too old-fashioned and adhering to rules that were made for the post-WWII industrialized West, and specifically blasted the Basel Accords, a set of rules setting out capital reserve requirements for financial institutions, as medicine that is not appropriate for today’s China. He described the banks as having a “pawnshop” mentality and the regulators as being too academic, too far away from the market.

I used the word “audacious” to describe his words, but I was being diplomatic, which he was most definitely not. The public’s reaction was more negative than positive, although it hadn’t quite reached fever pitch. 

Ma is famously controversial and is no stranger to getting slammed by public opinion, especially when he espouses views that are clearly “pro capitalist,” such as when he came out in defense of 996 overwork culture, so no one really thought it was a harbinger of things to come.  It was just your usual “Jack being Jack.” As more information came out and people realized how much Ant Group’s Credittech business relied on leverage, especially after watching hyperbolic videos such as this one, their views would sour further. 

The Bund Summit wasn’t any old conference.  Ma was one of the least important people there on the day he spoke (the first full day). The opening remarks were given by Wang Qishan, China’s Vice President, so you can imagine the caliber of attendees. Every current and ex-central banker of note was there, and select top-level international guests joined virtually, including the noted China bull, Ray Dalio. Ma was not introduced in his businessman capacity as co-founder of Alibaba and Ant Group, but instead as co-chair of the UN High-Level Panel on Digital Cooperation and United Nations SDG (Sustainable Development Goals) Advocate. Ant Group’s chairman, Eric Jing, by the way, spoke on the second day, and his presentation was on Ant Group and its achievements, particularly its partnerships with traditional banks. No other fintech competitor was invited.  So if you’re thinking Ant Group doesn’t have the sector’s best government relationships and recognition from regulators… think again.

So I’m inclined to believe that Ma et al. were very much in the know about the proposed regulations coming down the pipeline. I mean, it is well known that he was prepared to go to jail when he started Alipay, even telling his team that they need to have a list of who else would go after him, should his presence be insufficient, and so on and so on. 

Even if somehow he began to feel that Ant Group was too big to touch (which it really wasn’t), the P2P and university loan scandals would’ve been seen as warning signs, as would have been the various antitrust investigations earlier this summer (Update: they were pushed out with greater force on Nov. 10). 

Ant Group should be interfacing with the regulators constantly, since it is such an important stakeholder and because it has so many other issues under negotiation with the government: 1) the transaction data it collects, for one, which is still proprietary; and 2) credit data, which it seems still has not been completely incorporated into China’s personal credit system (We talk a little about how difficult it has been in this episode on Ant Group). 

It would also explain how pointedly Jack’s speech seems to have been aimed towards cutting down those regulations that were announced on the same day he was called in “for tea” (the colloquial term for an official dressing down). In fact, we also know that just this August, Ant Group secured a “consumer finance” license for $600 million. Not the most flexible license and mostly held by a handful of banks and retailers, it was a curious piece of news that was mostly buried in the IPO hype.

The new rules

But what were the regulations that were announced? Well, they are draft rules, and they are here.  For Ant Group, the proposals of concern are: 1) limiting loan amounts to $45,000 per individual, or the average of the borrower’s previous three years of income, and $150,000 per business; 2) the microlender must put up 30% of the capital. 

The loan amount limits do not affect Ant Group much, as its business currently stays within these limits (Jiebei, the loan product, maxes out at $45,000), but could be construed to limit future growth.  The capital requirement is the real killer: In the case of Ant Group, Huabei and Jiebei are each microlending companies registered in Chongqing, and neither has put up remotely close to 30% of the capital. 

Chongqing, a city in Western China, directly reports to the central government (one of four cities that do so, alongside Beijing, Shanghai, and Tianjin). Ma couldn’t get a license from anyone else back in 2014. According to the former mayor of Chongqing, Huang Qifan (who spoke immediately after Eric Jing at the Bund Summit, and is a finance VIP in China), he approved it then because as long as Ma wasn’t doing P2P, which he hated, he didn’t see a problem. 

Not only Ant Group, but all of Ant Group’s competitors quickly established microlending companies there. Right after Ma’s speech, folks quickly dug out Huang’s other speeches, including this one originally from June (and republished Oct. 28) where he explained in detail how Ant Group was able to get to such a high effective leverage using so little capital. 

TL;DR: the three regulatory bodies were not equipped to deal with internet-based micro-lending and while their rules regarding capital requirements were indeed observed, because the rules were made under the assumption that it would take months to deploy any capital raised/borrowed, not mere days, it actually allowed for the 100x expansion that Ant Group was initially able to achieve. 

By the time the regulatory agencies were in agreement about what to do, Ant Group had already lent out tens of billions of dollars in debt, and most of that—98% is the most current measure—were sold to banks and other financial institutions in the form of ABS (asset-backed securities). Obviously, this needed to be halted. 

Huang’s account seems to indicate that Ant Group voluntarily took down its leverage to 3x (it was offered 4x), again providing evidence that it is very much working in tandem with regulators, and not against. In Ant Group’s prospectus, it is noted that this action took place sometime in 2018.  This would match up with what has been reported in Chinese media this week, which is that Ant Group only had sought $12 billion worth of ABS this year, with $8 billion already approved.  (Of course, the implication is that they may be pulled as well, given the new regulations.) So … remember that the outrageous “100x leverage” has not, in fact, been available since 2018. It would explain why it was not part of the new draft regulations. That part had already been resolved.

A colorful video from Huang explains it thusly:

Ant Group had about 400 million in capital, which it took to the bank, and borrowed $800-$900 million against it, which is allowed, since banks can lend at a ratio of 1:2+. And now it has about $1.2 billion, which it went to the market and sold as ABS.  But because there was no limit on how many times you could go to the ABS market, you could do this as fast as you could get loan it out, which for Ant Group, was a matter of days. That $1.2 billion became an ABS 40 times, which is how Ant Group was able to get $50 billion+ of loans with just $400 million in starting capital.  

However, this doesn’t mean that Ant Group had filled in the gaping capital hole that it had created. The accepted leverage by the People’s Bank of China (PBOC) is 10x, and this had clearly exceeded that.  Depending on how the new rules are implemented, Ant Group is looking at a capital shortfall of at least $20 billion, as laid out per Chinese analysts.  That’s substantial, even for what would have been the world’s biggest IPO at $35 billion. With these new rules, it also makes sense that the market would have to seriously reconsider valuing Ant Group as a financial services company instead of a tech one, a fact it was pushing hard against during the IPO roadshow, despite already having been designated by the government as a financial holding company in September. 

The regulators

I know there were some investors who were paying close attention and were already doubting the viability of the IPO in mid-October, privately voicing their doubts. But the speech brought it to the forefront. It required a response. In the week following, a series of three extremely articulate and pro-regulation op-eds appeared in the state-owned media for the financial industry. They were signed with pseudonyms but believed to be the work of Zhou Xiaochuan (ex-PBOC, essay here), Zhang Tao (International Monetary Fund), and Chen Yulu (PBOC, essay here).  (There’re more too: non-anonymous ones such as that from Guo Wuping of the China Banking and Insurance Regulatory Commission, that call out Huabei and Jiebei by name as infringing of consumer rights.)

READ MORE: CHINA VOICES | The unsigned op-eds that foreshadowed Ant Group IPO suspension

I do not follow the work of these gentlemen and do not have an opinion one way or the other, but the content of the essays make it clear: There are many deficiencies in the current Chinese financial system, but that does not mean “Big Tech” (the piece believed to be written by Zhang uses this English word extensively) gets to do what it wants, even if we can acknowledge their contributions to society. 

TL;DR: We like innovation, but let’s not overhype the magic of “big data,” and anyway, you’re still operating in financial services, and so that’s how you’re going to be regulated, like it or not. That’s because if we the regulators don’t step in, and something goes wrong, who will pay the price?  Society will, the citizens will. Don’t you guys remember the Great Financial Crisis of 2008? A few parties won, yes, but all the rest of us? We lost. We were all set back. That’s not happening again, not on our watch!

And that is the chord that struck with the citizens. China has “beat Covid-19,” yes, for the most part, but it’s not like there’s euphoria. Most people are thinking: “It could be much, much worse.” Things feel fragile and there is little willingness to tolerate any risk that would precipitate an economic crisis, especially one that could have been prevented by the regulators. 

Whether or not this is the actual right step to take—do these rules really do anything other than rein in fintech, and do they possibly push the country towards more shadow banking? —is not top of mind for the average citizen. It must have been, however, for the regulators. Ultimately, however, it seems that they decided that more regulation was better than less. 

But why now?

And now we come to the biggest riddle of this all. I hope I’ve given you enough context on why the regulators wanted to step in, and why the citizens were in support. But that still doesn’t explain why the IPO was halted literally two days before the listing. As Reuters reported, there are folks with knowledge of the deal who say that it was due to outrage at Jack Ma’s comments. The regulators were personally offended. 

I can believe that. Ma wasn’t kind. More importantly, as I quoted in my article for Tortoise, Western experts thought this was an indication of the government’s capriciousness and unreliability.  China doesn’t know what it’s doing, as one op-ed columnist wrote, in the provocatively titled “Ant’s Suspended IPO Turns Jack Ma Into Ray Dalio’s Worst Nightmare.” (Dalio, by the way, responded with … nope.)

But was that how it was actually perceived on the ground in China and by those seeking to do business in China? I turned to the many China-focused investors I’ve now come to know as part of doing Tech Buzz, as well as some old friends from venture, and asked them if they felt the same. Nope. Hmmm, interesting, I thought. How about Chinese entrepreneurs and engineers? Normal everyday folk? Nope. No matter who I asked, no one thought it was to upstage Ma specifically, and everyone thought this was a good move.

Many thought his speech was made out of desperation, a last-ditch attempt to sway public opinion which failed. No one gets to Ma’s level in China without having some major cunning, they explained. The regulators would be people he knew well, not ones he was still feeling out. The hotheadedness isn’t indiscriminate. It was strategic. If it put him in the line of fire, that was because he knew which buttons he was pressing. A few even believed this was a stunt, fully coordinated by Ma and the regulators in order to legitimize Ant Group while crushing the rest of industry. (That seems too 5D chess for me.)

Either way, it didn’t matter, because there was every reason the government should step in, to stop the greed. On the part of Ant Group, and on the part of everyone in that microlending business. “Thank goodness the government did so before the public bore the losses,” they said, pretty uniformly. Kind of true. Even if you weren’t planning to buy Ant Group shares, you could’ve been an indirect shareholder of sorts—as Chairman Eric Jing noted at the beginning of the Bund Summit speech, “Hello to our big shareholder, the Social Security Fund, sitting in the audience.”

Furthermore, every single Chinese person I consulted said, “Why would the government need to go to such lengths to punish Jack Ma? Couldn’t they just say he had an issue with his taxes or do whatever it is they do?” As for why the last-minute halt, that’s simple enough—there are so many competing and conflicting interests among these agencies—it’s embarrassing that it got down to the wire as it did, but better to have reversed course than to have the public holding the bag for the sake of saving face and trying to get the Biggest IPO in the bag. Isn’t that interesting? You could use the concept of “saving face” in these two directly opposing ways, and explain the situation to your satisfaction. 

It wasn’t surprising to have the public support the eleventh-hour halt. But it was surprising to me how many investors and finance professionals whose livelihoods depend on a well-functioning capital market thought the same. But as someone pointed out on Twitter, this could be one of those reflexivity things, a self-fulfilling prophecy. If the people putting money into the market and actively participating in it believed the regulators to be acting for their good, for the good of the market, for the good of society—then does it really matter what anyone else thinks?

Last bits

Rather than trying to figure out what exactly happened at Ant Group, whose valuation will almost certainly be discounted, maybe even halved, most folks I know have already moved on. After all, the IPO, if it is revived, is not likely occur for another six months, at least. There are many more immediate problems at hand. What’s the impact to Alibaba and others in e-commerce, all of whom benefited from the spigot of easy consumer credit? Other retail players? What about all the advertising-based platforms who were raking in the dough from all the microlending marketing campaigns? And so on and so on.

And there are so many other risks coming too. The regulators are clearly just getting started getting down and dirty with BigTech, as evidenced by the antitrust draft laws unveiled on Nov. 10. They’re now explicitly forbidden from all sorts of anticompetitive behavior that all the platforms have been engaging in for years, such as exclusivity or outright banning, and of course all manner of crazy subsidies. It was something I didn’t think was ever going to change. But what do you know, they’re here, and if there’s anything I learned from this Ant Group IPO halt? It’s that I’m not going to assume that I know how all the stakeholders are going to feel about something, not just based on what makes sense to me.

As fintech titan Ant Group prepared for a long-anticipated IPO, a struggle over the reach of regulation between founder and controlling stakeholder Jack Ma and financial regulators spilled into public view. 

In the days leading up to Nov. 5, when the fintech giant was set to go public and raise an estimated $34.5 billion, a series of pointed attacks on Ant Group were published in financial media including the central bank’s official newspaper. 

These articles called Ant Group “too big to fail” and a “systemic risk,” likening Ant Group to the sprawling financial institutions that brought about the 2008 crisis. One accuses it of tricking its customers in taking on extra debt. All argue that Ant Group should be required to follow the Basel Accords, the bank rules created in the wake of the 2008 crisis.

Some were rumored to be written by China’s top echelon of financial regulators. The people rumored to be behind the articles include Zhou Xiaochuan, the longest-serving governor of the People’s Bank of China—a figure who presided over China’s rise to a financial powerhouse and led the development of its modern financial system. 

These articles likely provide insight into regulators’ intentions for fintech. Ant Group’s lending practices have emerged as a key issue for regulators: On Nov. 2, the China Insurance and Banking Committee released a draft regulation that would limit the amount companies like Ant can lend out to micro-borrowers.

READ MORE:  UPDATED: Ant Group IPO delay and Jack Ma’s ill-timed speech

Ant Group: no need to regulate

In the last year, authorities have been making moves to raise the regulatory bar for Ant Group, among other fintech giants, and bring it closer to what banks have to comply with. 

In September, the State Council released new measures to introduce licensing requirements for  non-financial holding companies that are involved in financial services, and could potentially raise capital requirements for companies like Ant Group. 

“If you were previously unregulated, it feels like a clampdown,” Andrew Polk, co-founder of research firm Trivium, told TechNode. 

The People’s Bank of China (PBOC), which is chiefly responsible for “macro-prudential” policy to manage overall risk in the financial system, appeared particularly worried about Ant Group. In July, the PBOC asked banks to report lending data for H2 2018, the whole of 2019, and H1 of 2020. The central bank asked for separate reports on loans going through Ant Group’s platforms. 

As Ant prepared for a history-making IPO, regulators were asking the company to accept being regulated more like a bank. This posed a threat to the sky-high valuation that would justify raising more than any company had ever asked from the markets. 

But Ma believed that regulators misunderstood his business. Ant is more than a bank—as one of China’s two major online payments providers, it knows nearly everything about its customers—from rent payments to 3 a.m. e-commerce impulse purchases. Armed with this information, Ma believed, the company could assess risks with an accuracy banks could only dream of—making it safe for the company to operate at high leverage.

Ma thought the regulators were living in the analog past—and with weeks to go before the IPO, he decided to tell them in a very public setting.

On Oct. 24, Ma spoke at the Bund Summit, a Shanghai conference where some of the world’s top financiers discuss the state and future of the world economy, and China’s role in it. Speakers at this year’s conference included: China’s vice president Wang Qishan; the current and former governors of the PBOC, Yi Gang and Zhou Xiaochuan; the vice chairman of the China Securities Regulatory Commission, Fang Xinghai; high-level executives of China’s big four banks; former governor of the European Central Bank Jean-Claude Trichet; former UK Prime Minister Tony Blair; former US Treasury Secretary Robert Rubin; founder of US hedge fund Bridgewater Associates Ray Dalio; and former governor of the Bank of Japan Masaaki Shirakawa. 

In this setting, Ma said: “The Basel Accords are more like a club for the elderly”—irrelevant to the “young” field of online finance. The accords are a set of international standards created in the wake of the 2008 financial crisis to reign in the banks and improve the stability of the world’s financial sectors. 

The Basel Accords are about treating the diseases of the elderly with antiquated and overly complex systems. What we have to think about is: “What we should learn from the elderly?” The elderly and young people are not the same. The elderly care about whether there is a hospital, and the young people care about whether there is a school district.

The Alibaba founder said that tech companies are not afraid of regulation, but regulation using antiquated thinking: 

We are not afraid of supervision, we are afraid of monitoring using the way of yesterday. We cannot manage the airport the same way as the railway station, and we cannot manage the future with yesterday’s methods.

China’s financial sector suffers from a “pawnshop” mentality, Ma says, that must be replaced with big data.

The pawnshop idea of ​​mortgage cannot support the financial needs of world development in the next 30 years. We must use today’s technological capabilities to replace pawnshop thinking with a credit system based on big data.

The day after Ma’s speech, at the same event, Shang Fulin, director of the Economic Committee at the Chinese People’s Political Consultative Conference and the former governor of the China Banking Regulatory Commission, said that regulation must catch up with financial technology in order to reign in its excesses, making special notes of risks to the economy and privacy that big tech brings to the finance sector.   

As modern information technology is more deeply involved in financial transactions, risk decision-making, internal control compliance, intelligent analysis, and other activities, information technology risks are more likely to lead to chain reactions such as operational risk, credit risk, liquidity risk, and so on. It is necessary to guard against the risks that may be brought about by the digitization of traditional business, as well as the risk of using technology to innovate in finance.

The ‘old men’ reply 

A week after Ma’s now-infamous speech, he got a response: three prominent articles in state media laying out a case for stricter financial regulation on Big Tech, widely taken to represent the views of regulators. 

The first shot was a forum comment highlighted by the online edition of Guangming Daily, an influential state newspaper on Oct. 26. Ma was “arrogant,” and “the speech was not an idle talk over tea, but a targeted one in the context of Ant Group’s IPO.” “Without this kind of regulation [the Basel Accords], the size of the IPO will definitely be proportional to the sound of explosive thunder,” the commenter wrote, drawing on an image frequently used to describe industries as out of control.

A week after Ma’s speech, three strongly-worded editorials criticizing internet companies’ involvement in finance, all attributed to pseudonymous “senior scholars,” were widely reprinted on Chinese media. The latter two were printed in the official newspaper of the People’s Bank of China, Jinrong Shibao (literally, “the Financial Times”—no relation to the salmon-colored London paper).

On Oct. 31, a pseudonymous op-ed called for strict financial regulation on big tech. Market insiders believe that the author, credited as “senior scholar” Zhang Feiyu, was an insider from the regulatory authority, Reuters China reported. We are a little confused about the place of publication—we’ve found reprints citing both independent financial media Caixin and the PBOC-linked Jinrong Shibao as the original.

“There was no supervision of the development of fintech in its early stages,” Zhang wrote, reminding readers of the scams and losses associated with peer-to-peer lending platforms, which rose and fell 2007-2018.

Financial regulatory authorities must dare to say “no” when supervising big tech companies—otherwise they will be easily misled by their technology, held hostage by public opinion, and fail to conduct effective supervision, which will eventually distort the market and generate financial risks.

On Nov. 1, a second warning about unregulated fintech appeared in Jinrong Shibao under the name Zhou Jueshuo, emphasizing the systemic risks associated with fintech.

Rumours on social media identify the author as Zhou Xiaochuan, who served as the governor of the PBOC for 16 years. Using pseudonyms when writing publicly is common practice among government-affiliated public intellectuals, especially household names like Zhou Xiaochuan. 

The article did not single out a target, but attacked internet companies that participate in the financial sector. In the first two paragraphs of the main body, the author makes note of the benefits of internet companies’ involvement in finance, mentioning “Alibaba, Baidu, Tencent, and JD.com.” It credits Ant with bringing hundreds of millions of people into the financial system.

Other than these name drops at the top, the text only brings up Ant Group as an example of a big tech company that has become too big.

The article argues that big tech firms in the finance sector must be reigned in, and outlines a strategy for regulators. The article blames big tech for:

• Using data to gain unfair advantages, effectively creating monopolies that cannot be easily managed by traditional tools against unfair competition.
• Evading financial regulation by obfuscating the true nature of businesses and products, and pushing the limits of business licenses to provide financial services.
  • “If a large Internet company provides a large number of financial services but claims to be a technology company, it is evading regulatory oversight, will be more prone to disorderly expansion, which causes hidden risks, and is not conducive to fair competition or consumer protection.”
• Complexity of technology makes it harder to identify risks and determine responsible parties if something goes wrong. 
  • “It is difficult for regulators to understand high-tech ‘black boxes’ and their hidden risks.”
• Data collection practices that pose risks to consumers through data leaks and algorithmic discrimination.
• Posing serious systemic risks to the financial system—with the possibility of a domino effect if they fail. 

Large Internet companies are [said to be] “too big to fail.” Ant Group counts over 1 billion individual users, over 80 million institutional users, and 118 trillion digital payment transactions. Its listed market value may set a historical record. If it [Ant Group] faces financial difficulties, it will cause serious contagion risk.

The section concludes:

Due to the wide network coverage of large internet companies, the convergence of business models and algorithms, the contagion of financial risk will speed up and may evolve into systemic risk in a very short time.

To solve these problems, the author argues fintech giants must be regulated in the same class as banks, but grants that authorities must update their systems for a tech-driven era. He calls for rules to protect consumer rights and prevent systemic risk, requiring fintech companies to seek licenses and accept oversight like traditional financial firms. 

Finally, on Nov. 2, a third essay appeared in the PBOC newspaper, this time credited to “senior scholar” Shi Yu. The Nov. 2 essay singles out Ant, accusing it of exploiting retail borrowers.

The author starts by saying that the “‘so-called’ innovative Ant Group” is “the institution with the highest degree of cross-industry sprawl in the world.” Rebutting Ma, it continues to argue that “‘Yesterday’s regulation’ is not useless, and the Basel Accords are not outdated.”

The essay attacks the lending models of Ant Groups’ virtual credit card Huabei and its money market fund Yu’ebao, saying that what it calls “inclusive finance” is actually very costly to consumers: 

The annualized interest rate when borrowing from [Ant Group virtual credit card] Huabei was once close to 24%, and has dropped recently, but is now about 15%. At the same time, the Huabei borrowing mode on Alipay’s Yu’ebao feature… raises the interest that borrowers need to pay from the 5%-6% of a bank loan to 15%.

It also accuses Huabei of manipulating users’ consent and tricking them into taking on debt: 

At present, Huabei’s lending interest rates are disclosed in the form of daily interest rates, and are not converted into annualized rates, as required by regulations. Borrowing is often set as the default choice during periods such as Singles Day, and customers are easily deprived of other payment options.

Finally, the article urged regulators to examine Ant Group’s structure to require it to place financial services like Yu’ebao and Huabei under properly licensed online banks.

The moral

Probably the strangest state media response to Ma’s speech was the victory lap from official news agency Xinhua.

On Nov. 2, Ma and two other top Ant Group executives were called in for a talk with regulators, while regulators issued new rules about microlending.

That evening, Xinhua rendered a verdict on the Ma affair via the medium of roundabout bedtime podcast. Xinhua’s “Evening read”—a podcast offering “beautiful writing, every evening around 10 p.m.”—selected an essay titled “You can’t just say anything, you can’t just do anything; people can’t just do as they please.” 

Ma is not mentioned by name, but he appears by rebus in a painting accompanying the article, which shows a horse-shaped cloud floating over a leafless, dark forest. The billionaire’s name can be translated as “horse cloud.”

In a gentle voice accompanied by light piano and strumming guitar, host Wu Weiling tells listeners: “You can have different opinions, but you don’t have the right to throw stones.”

“Everything comes at a price,” Wu said in words highlighted in red in the accompanying transcript. “If you don’t have the capital, don’t do as you please.”

Chinese e-commerce giant Alibaba reported stronger-than-expected results for the September quarter, but its share price in New York declined 2.7% on slower sales growth and the suspension of the dual public listing for its fintech affiliate Ant Group.

Why it matters: Alibaba’s sales were buoyed in the September quarter from an economic rebound in China, much like the preceding quarter. But the Ant Group public offering mishap weighed on the parent company, which holds a third of the fintech company.

•  The Thursday dip in share price followed a 8% drop on Tuesday in New York after the Shanghai exchange halted Ant Group’s mega listing due to “significant changes” in the regulatory environment.

READ MORE: Ant Group IPO delay and Jack Ma’s ill-timed speech

Details: Alibaba reported revenue of RMB 155 billion ($23 billion) in the quarter ended Sept. 30, representing a 30% year-on-year increase from the same period in 2019, the company said in a statement on Thursday. The earnings beat the average analyst estimate compiled by Yahoo Finance.

• Revenue growth decelerated significantly from the 40% year on year growth figure seen in the same period of last year, but was still a strong quarter for Alibaba given lingering coronavirus impact, according to Marina Koytcheva of CCS Insight. Its results are “strongly suggesting that the transition to online shopping and digitalization of services is a sustainable trend even as life in China has now mostly returned to its pre-pandemic normal,” she said in an emailed comment.
• Net income attributable to ordinary shareholders fell 60% year on year to RMB 28.8 billion, mainly attributable to a one-time gain from equity interest in Ant Group last year as well as share-based compensation expenses during the quarter, according to the filing.
• Representing 84% of total revenue, the company’s core e-commerce revenue increased to RMB 130.9 billion. The figure grew 29% year on year compared with 40% year on year growth in the same period last year.
• Taobao Deals, Alibaba’s Pinduoduo-like business targeting value-conscious consumers, became a key driver for user acquisition as the company competes head-on with rivals like Pinduoduo and JD.com in expanding to lower-tier markets. Taobao Deals launched a major new update in March, and monthly active users jumped 75% quarter on quarter to 70 million as of September.
• Cloud computing revenue grew 60% year over year to RMB 14.9 billion, driven by growth in revenues from customers in the internet, finance, and retail industries.
• Cost of revenue in the quarter was RMB 89.9 billion, or 58% of revenue, up 3% year on year mainly driven by increased cost of inventory from direct sales businesses such as Tmall Supermarket.
• Domestic consumption, cloud computing and data intelligence, and globalization will remain the company’s three long-term growth engines, Daniel Zhang, chairman and chief executive officer of Alibaba Group, said in a statement.
• Zhang said in a conference call with analysts that the company is “actively evaluating the impact” of the regulation change on Ant Group’s listing and “will take appropriate measures accordingly.”

Context: Ant Group this week will begin refunding Shanghai investors who had placed orders for the postponed public listing.

• Alibaba sold its stakes in Meinian Onehealth Healthcare Holdings, Shanghai-listed medical examination services provider, according to a Meinian filing on Wednesday.

Ant Group will begin this week refunding Shanghai investors who had placed orders for what was expected to be a record-breaking public listing on the city’s technology board, but instead became a record-breaking suspension.

Why it matters: The suspension on Tuesday of Ant Group’s widely anticipated public offering has brought uncertainty among markets and investors. Retail investors had bid a total of $2.8 trillion for shares of the company traded in Shanghai.

• The Shanghai Stock Exchange said that the company may no longer meet disclosure requirements after changes in regulations. Ant Group then cancelled its listing in Hong Kong.

Details: The fintech giant will issue refunds to Shanghai investors beginning Friday until Monday, according (in Chinese) to a Shanghai Stock Exchange statement on Thursday, but didn’t specify the method.

• Ant Group and the principal underwriters will refund the application monies and brokerage fees, as well as interest at the bank deposit rate for the time period that the funds were on hold.
• The company began returning $167.7 billion to Hong Kong investors on Wednesday, and said it expected to complete all refunds by Friday.
• Refunds to Hong Kong investors were set to take place in two batches, starting with those whose applications were unsuccessful before moving onto successful bids. No such details for the Shanghai refunds were released.
• The Shanghai Stock Exchange’s refund announcement said that Ant Group and the lead underwriters had decided to suspend the Shanghai public offering, while the initial announcement said it had been the bourse’s decision.

Context: Ant Group had been facing increased regulatory scrutiny, particularly over its microlending platforms and position in the digital payments market, when the group’s controlling shareholder Jack Ma told a crowd of Chinese regulators and financiers that China suffers from overbearing regulation.

• After the billionaire’s speech, authorities called him and two other top Ant Group executives for a “regulatory talk” on Monday.
• New measures on microlending were announced on the same day, and Ant Group’s IPO was abruptly halted on Tuesday evening.
• Chinese media reported that it will be at least six months before the company is able to relist.

READ MORE: UPDATED: Ant Group IPO delay and Jack Ma’s ill-timed speech

The US president has decided to put off blacklisting Ant Group after a phone call between a senior US official and an Ant executive, Reuters reported.

Why it matters: The US State Department had reportedly submitted a proposal to the White House to blacklist the fintech giant last month, citing security issues. The move would have cut it off from US capital ahead of what was expected to be a blockbuster stock market debut.

• Three sources said that US President Donald Trump decided against the move on concerns that it was too precarious ahead of the election.

Details: In a phone call, Alibaba President Michael Evans convinced US Commerce Secretary Wilbur Ross to reject the State Department’s proposal, the Reuters sources said.

• The Commerce Secretary feared that blacklisting Ant would antagonize Wall Street close to the election, potentially bringing a lawsuit or sending markets on a downward spiral, the report said
• Another source said that Wilbur Ross decided that Alibaba is already scrutinized because its e-commerce app, Taobao, is on the notorious markets list for selling counterfeit goods. Ross’s decision was not affected by the phone call or worries over Wall Street, the source said.

Context: On Tuesday evening, Chinese regulators suspended Ant Group’s Shanghai listing. The company consequently halted its Hong Kong listing.

• Experts TechNode spoke with agreed that a recent speech in Shanghai tipped Chinese authorities over the edge.
• China’s financial regulators have been working to de-risk the sector and increase oversight of fintech firms since 2017.
• Ma’s speech stepped on the wrong toes, and he was summoned to Beijing for a “regulatory talk” with regulators on Monday. The contents of that meeting are unknown, but the Shanghai Stock Exchange suspended the Ant Group listing the next day.
• The Ant Group IPO was set to be the biggest of all time at $35 billion.

READ MORE: Ant Group IPO delay and Jack Ma’s ill-timed speech

Ant Group’s suspended $34 billion dual listings in Shanghai and Hong Kong may have resulted from a combination of regulators’ increased intolerance for risk alongside recent bold statements from Jack Ma, the founder of parent company Alibaba Group.

Here’s what sources told TechNode.

The sequence of events

• On Oct. 25, fewer than two weeks before Ant Group was set to go public in a blockbuster dual listing, Jack Ma told a crowd of China’s top financiers and regulators in Shanghai that the financial sector was overly regulated.
• The country has “no systemic risk” because “there is no system,” China’s most recognizable tech billionaire told the crowd which included regulators who have have been working to minimize risk in the financial sector.
• China has “inertia” in its thinking, “innovators must make mistakes,” and there are too many “documents” that regulate what people can and cannot do, Ma said.
• With only three days to go for Ant Group’s Hong Kong debut, the company’s chairman and CEO, Eric Jing, was summoned on Monday to a meeting in Beijing with the People’s Bank of China, China Securities Regulatory Commission, and the foreign exchange regulator.
• The company said the meeting was a “regulatory talk” but gave no further details. “Ant Group is committed to implementing the meeting opinions in depth,” it said.
• On the same day, China’s insurance regulator issued new rules on microfinancing—a large swathe of Ant Group’s business—which tightened collateralization requirements. A Bloomberg report suggested that capital requirements for Ant’s lending business are the focus of the regulatory clampdown.
• The new rules will require Ant to fund at least 30% of the loans it gives out from its own balance sheet. This would render many of its loans noncompliant as Ant currently funds only 2% of its loans.
• Late Tuesday, just a day after the closed-doors meeting, the Shanghai Stock Exchange abruptly suspended Ant Group’s debut on the Shanghai bourse, saying there had been “significant changes” in the regulatory environment the company operates in.
• The company issued a statement just hours after the Shanghai bourse’s announcement seeking to assuage regulators.
• It will “overcome the challenges” and “live up to” principles of “stable innovation, embracing regulation,” it said, and is waiting on regulators to make further decisions on its listings.
• Ant Group also clarified that the pausing of its Hong Kong listing was a direct result of its Shanghai suspension.

Ignoring the signs

• Ma’s speech in Shanghai was just the tipping point in a long struggle between Ant Group and China’s top financial watchdogs, according to experts TechNode spoke with.
• Chinese regulators have been working to de-risk the financial sector since 2017, and Ant Group has been a key target of this campaign. “It’s really the culmination of something that’s been brewing for a while,” said Andrew Polk, co-founder of research firm Trivium.
• De-risking the financial system is one of Xi Jinping’s top policy priorities, along with poverty alleviation, and a reduction of pollution, Polk said.
• In the past year, dozens of new regulations have been enacted aimed at increasing oversight of fintech companies, including lending, payments, and liquidity requirements.
• The central bank is reportedly looking to launch an antitrust investigation into Alipay and Wechat Pay’s dominance over the digital payments sector.
• The People’s Bank of China updated its mandate just days before Ma’s speech to make special reference to digital payment providers and “important financial companies”—language that was absent in its previous iteration.
• “It’s straight out of a regulator’s playbook, but an industry that hasn’t been regulated in the past doesn’t like this,” Polk said.
• Traditional banks have not been fans of the fact that Ant Group and Webank have been allowed to grow into de facto banks in a relatively relaxed regulatory environment. They have been pushing regulators to increase their oversight of fintech companies, a source told TechNode.
• The China Banking and Insurance Commission is discouraging lenders from working with Ant Group to provide loans, which don’t fulfill capital requirements set out in the draft regulation announced on Monday.
• Ant’s credittech business brings in almost 40% of its revenue, according to its IPO prospectus.
• At the same time, China’s central bank has been working on the digital yuan, aiming to level the playing field for traditional banks in the digital payments sector, sources told TechNode.

The error of flamboyance

• In this environment, Ma’s boldness in rejecting regulators’ efforts to tighten controls stepped on the wrong toes. The Alibaba chairman’s cult of personality doesn’t sit well with conventional Chinese leadership, which leans on Confucian values.
• When pressured, Chinese tech entrepreneurs are expected to defer to leaders, who will usually let them off if they show respect, as indicated by past events.
• In 2018, Bytedance CEO Zhang Yiming issued an apology for going against “core socialist values” after regulators clamped down on its popular news-gathering app Neihan Duanzi.
• But the Monday meeting apparently did not appease regulators, who moved to shut down the Ant Group listing. “Ant came out with its tail behind its legs,” Polk said.
• Experts said it is unlikely that the suspension will be permanent, but it is unclear how long it will take for the company to come to an agreement with Chinese authorities.
• Ant Group’s valuation is also a key consideration for regulators. On Friday, Ant said that investors had placed orders worth $2.8 trillion in its Shanghai listing, a phenomenon likely to trouble authorities intent on reducing market speculation.
• A concurrent clampdown on cryptocurrency executives has been evolving in the last few weeks, with reports of top brass for Chinese crypto exchanges being arrested. “It all fits together in the policy of de-risking,” Polk said.

Updated: added regulator’s capital requirements for Ant Group’s loans to the first section, and that regulators are discouraging lenders to work with the company in the second.

Ant Group, Chinese e-commerce giant Alibaba’s payments affiliate, is cutting support and funding to the overseas e-wallet companies it has invested in as the company pulls back from ambitions to become a global leader in payments, Reuters reported.

Why it matters: Ant Group has made headlines over the past few months over its plans for a dual listing in Hong Kong and Shanghai. The company aims to raise $34.4 billion—potentially the largest IPO in history.

• Since 2015, the company has invested in a slew of e-wallet firms around the world as it sought to expand its overseas presence, simultaneously launching its own payments platform Alipay in several markets globally.

Details: Ant Group is now scaling back the hundreds of millions of dollars the company spent each year on its overseas fintech investments, while bringing its support employees back home, according to Reuters’ sources in nine countries.

• The move started in late 2019 as the company began to prepare for its much-anticipated initial public offering (IPO) and grappled with regulatory changes at home.
• Ant has also reportedly hit the brakes on plans to create a global QR code-based payments system that would connect all the e-wallets it has funded.
• The comany has invested in around a dozen fintech companies including India’s Paytm, Myanmar’s Wave Money, the UK’s Worldfirst, and Thailand’s Truemoney.
• The company still plans to invest abroad, reserving around 10% of the $34.4 billion it hopes to raise in its IPO for overseas investments.
• A person familiar with the matter told Reuters that Ant plans to provide initial support to the overseas e-wallet firms it invests in and then hopes to see them succeeed by themselves.

READ MORE: Ant Group to close Hong Kong order books early on strong IPO demand

So high is demand for shares in Alibaba’s fintech unit Ant Group that the company has decided to finish its institutional book-building process in Hong Kong a day earlier than planned.

Why it matters: Through dual listings in Shanghai and Hong Kong, announced in July, Ant Group is looking to raise $34.4 billion. This would make it the biggest public offering in history, bigger than parent company Alibaba’s listing in 2014 and Aramco’s in 2019.

Details: The company will close its Hong Kong books at 5 p.m. on Tuesday, a day earlier than planned.

• During the book-building process, underwriters invite institutional investors to bid for the number and price of shares they are willing to purchase. After collecting this information, underwriters set the cutoff price for the listing.
• Ant announced the pricing and date of its initial public offering (IPO) in regulatory filings made public yesterday.
• The Alibaba affiliate will sell 1.67 billion shares in each of the two bourses, roughly priced at $10 apiece. Shares sold in Shanghai will start at RMB 68.8, and at HKD 80 in Hong Kong.
• Ant Group declined to comment on this story.

Context: Soon after announcing its IPO plans, Ant revealed robust financial performance in 2020.

• In first half of 2020, revenues rose 38% year on year and profits rose almost 20% in the same time period.

READ MORE: Ant Group IPO filings: five key takeaways

China Tech Investor is a weekly look at China’s tech companies through the lens of investment. Each week, hosts Elliott Zaagman and James Hull go through their watch list of publicly listed tech companies and also interview experts on issues affecting the macroeconomy and the stock prices of China’s tech companies.

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Elliott and James try to get their minds around Ant Group’s IPO, and attempt to explain the business behind what is likely to be the biggest IPO in history.

Hosts may have interests in some of the stocks discussed. The discussion should not be construed as investment advice or a solicitation of services.

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Fintech giant Ant Group plans to raise more money through its listing on the Shanghai tech board than its simultaneous debut in Hong Kong, Reuters reported citing sources with direct knowledge of the matter.

Why it matters: Ant Group’s initial public offering (IPO) is expected to rake in $30 billion and could be one of the biggest listings of the year.

• Raising the majority of its funds in Shanghai would be a big win for the budding year-old STAR Market.

Details: The breakdown of the total float between the Shanghai and Hong Kong stock exchanges has not been decided. But after feedback from investors, Ant Group is looking to sell more shares in Shanghai, according to Reuters.

• Ant Group’s IPO managers were asking Chinese institutional investors to potentially commit between RMB 1 billion to RMB 1.5 billion ($146 million to $219 million), as well as agree to hold their shares for a year, the report said.
• The company set a placeholder of RMB 48 billion for the Shanghai listing in its filing.

READ MORE: Ant Group IPO filings: five key takeaways

Context: Ant Group has not disclosed key details for the dual listings including the timetable, total float, and number of shares. It is looking to sell between 10% and 15% of its total shares.

• Its IPO filings revealed fast growth in revenues and profits. The fintech company has made more profit in the first half of 2020 compared with the whole of 2019.
• Companies listings on the STAR Market made $10.3 billion in the first seven months of 2020, Reuters reported citing data from research firm Refinitiv. This makes the tech board the second-biggest market in the world.
• China is looking to lure homegrown tech giants away from listing abroad with the Shanghai tech board featuring relaxed listing rules.
• Similar reforms are also underway in Shenzhen. The bourse in China’s tech manufacturing capital announced last week that it will allow dual-class shares.
• Following the Luckin Coffee scandal and amid rising US-China tensions, US-listed Chinese tech companies are under increasing scrutiny.

India on Wednesday banned another 118 Chinese-made apps, including Tencent’s popular video game PlayerUnknown’s Battlegrounds, as border tensions between the two nations continue to escalate.

Details: The Indian Ministry of Electronics and Information Technology announced it had decided to block 118 apps that it said were prejudicial to India’s sovereignty, integrity, and national security, the ministry said Wednesday in a statement.

• The newly banned apps include Chinese search engine giant Baidu’s two mobile search apps, smartphone maker Xiaomi’s Sharesave, Ant Group’s mobile payment apps Alipay and Alipay HK, as well as Tencent’s cloud-storage app Weiyuan and Wechat Work. Tencent’s Wechat was banned in a similar crackdown on Chinese apps in June.
• Tencent’s PlayerUnknown’s Battlegrounds had more than 50 million players in India as of April 2019, local media reported.
• The ministry said it had received many complaints about these apps for “stealing and surreptitiously transmitting users’ data in an unauthorized manner to servers which have locations outside India.”
• “This move will safeguard the interests of [tens of millions] of Indian mobile and internet users. This decision is a targeted move to ensure safety, security and sovereignty of Indian cyberspace,” the ministry said in the statement.

Context: The ban follows a standoff between Indian and Chinese troops earlier this week and media reports that a Chinese land mine killed an Indian soldier during the confrontation.

• In June, India banned 59 Chinese apps on national security concerns following a deadly border clash with China.

China’s investment market is going online, as digital brokers and other investment companies see new opportunities to help mainland investors send their money abroad. China’s huge economy and high savings rate means its investment services market could become one of the world’s largest, but options are limited for savers. One way to diversify is making investments in overseas markets like the US and Hong Kong.

Players old and new are dazzled by a potential user base of millions, but regulators remain tepid. While new regulations last fall encouraged tech and financial firms to go into mutual funds, most of the investment action is happening through brokerage services beyond mainland regulation in Hong Kong.

Bottom line: Digital asset management is a hot field, with a number of already-listed players offering financial services. But these players face real uncertainty about both US and Chinese regulation—most are domiciled overseas in an effort to avoid capital controls and limits on trading. As long as China keeps its capital markets mostly closed, the industry is likely to remain in a pretty uncertain position.

Room to grow: Mainland investors have traditionally had few places to put their money. But as China liberalizes its financial system, more people are seeking opportunities to diversify their assets through investments on global markets. Digital brokerage services are following the customers.

Executives at internationally-focused brokerage Futu estimate that there are 20 million Chinese nationals with overseas assets. By comparison, financial information outlet Shujubao reports (in Chinese) there are 158 million trading accounts in China.

• Consulting firm Oliver Wyman forecasts Chinese offshore financial assets will reach $2.1 trillion by 2022. 
• In domestic markets, Chinese stocks added over $1 trillion in value in just the first eight days of July, reflecting surging public interest in buying shares. Bloomberg dubbed investors’ strong appetite for investment vehicles a “budding equity mania.” 

The players

Brokerage startups with a global outlook are luring new customers and challenging established mainland Chinese trading firms and tech firms to expand their services, while big firms like Tencent and Ant Group are involved in advisory services such as personalized investment advice. Smaller firms lead in brokerage services, where investors can directly open accounts to buy stocks and bonds. 

Snowball Finance (Xueqiu): The New Zealand-registered service, founded in 2010, originally served as a financial news and advice platform for Chinese investors. It now offers brokerage services for US, HK, and China-A shares, discussion with other members, and more, all geared towards mainland users. 

• Snowball has over 12 million monthly active users. 
• Alibaba’s Ant Group invested $120 million into the app in 2018, and other investors include Sequoia China and Morningside Capital.

Futu: Founded in 2011 by former Tencent employee Leaf Hua Li and headquartered in Hong Kong, Futu aims to provide a “one-stop shop” for data and trading services in Hong Kong, mainland China, and US stock exchanges, boosted by investment from Tencent. It went public on the Nasdaq in March 2019, raising $90 million. According to the company’s most recent financial report, 66.7% of its trading volume is US stocks.

• Futu reported a strong second quarter with its highest ever total trading volume of HK$ 643.9 billion ($83 billion) and 303,102 total paying clients, an increase of 84% year on year.
• Futu credits its popularity to its interactive investor community: inexperienced traders can attend lessons and share ideas within the app.

Tiger Brokers: Launched in 2014, Tiger Brokers targets Chinese investors wanting in on the action in US and Hong Kong markets. Yet despite its similarity to Futu, it’s far less profitable. The company’s IPO on the Nasdaq in March 2019 raised $104 million.

• Tiger reported an additional 33,800 accounts with deposits opened in the second quarter of 2020, and holds nearly 60% of the market share for global Chinese investors in terms of US securities trading volume.
• Mainland Chinese users still make up the bulk of Tiger’s users, but international users made up 10% of the quarterly user growth, according to their Q2 earnings call.

Huatai and Zhangle Global: Huatai Securities launched a global stock trading app called Zhangle Global from Hong Kong in July, and plans to leverage its success in the mainland trading market to move overseas. 

• Zhangle Global is specifically aimed at Chinese investors living outside the mainland, according to a Reuters report. Huatai’s service for mainland users, Zhangle Fortune Path, had 9.11 million monthly active users (in Chinese) as of June 2020. 

Major tech firms aren’t directly competing as brokers. Instead, they target people already in their user base with simpler solutions like personalized investment advice and recommendations for mutual funds, a professionally managed portfolio containing the assets of multiple investors. 

Tencent tests the waters: Tencent is leveraging its ubiquitous messaging app Wechat to attract users for its new fund advisory service Yi Qi Tou, it announced last week. Yi Qi Tou isn’t a brokerage service, providing mutual fund recommendations instead. 

• Teng An Fund, Tencent’s fund distribution unit, said the service will be launched on Wechat after a trial period.  
• Tencent has also been strategically cooperating with Futu since 2018 through traffic, content, and cloud services.

What about Alibaba? So far, Alibaba’s Ant Group has invested in Snowball but not made any forays into brokerage services itself. They have launched other financial services, notably money market fund Yu’ebao in 2013 and a new advisory fund venture called Bang Ni Tou through a 2019 partnership with Vanguard. Both services are accessed through payments app Alipay, and Bang Ni Tou acquired 200,000 clients in its first 100 days. 

Enter Bytedance? Bytedance also appears to be exploring the offshore investments market with a new subsidiary called Squirrel Securities. But with a reported one epmployee, this company is clearly in early days.

Why go abroad? Exchanges in China have a much shorter history than in other countries, and are dominated by small-time retail investors. The Shanghai and Shenzhen stock exchanges opened in 1990, and Hong Kong’s many small exchanges didn’t merge into the Stock Exchange of Hong Kong until 1986. In comparison, foreign markets like those in the US have a reputation for stability and rationality. 

• More than 80% of A-share stakeholders are under age 40, according to a study by Shujubao (in Chinese). About half of all investors have little investment experience, and nearly 90% of all Chinese investors are primarily pursuing short-term gains over long-term financial planning.
• Shujubao also reports that out of the 158 million A-share accounts opened at the end of November 2019, 99% of them are retail investors that bring home less than $700 a month.
• Individual, inexperienced traders are the bulk of Chinese investors, making “share prices vulnerable to extreme swings in popular sentiment,” according to a Bloomberg article. 
• “There’s always been a tremendous demand for people in China to hold foreign assets,” Adam Lysenko, Associate Director at Rhodium Group, told TechNode. “There’s definitely an attraction to being in a market comparatively as stable, deep, and anchored by specific institutional investors as the US is.”

Regulatory hurdles for firms and investors

Cross-border brokerage: China’s brokerage industry is intensely regulated, and it’s not entirely clear if trading foreign securities is actually legal. Brokerages have avoided the issue by domiciling overseas, and Chinese regulators have let these platforms carry on so far. But with a clear focus on users in the mainland, these companies may face demands to register there.

• Neither Futu nor Tiger are licensed as a securities brokerage in China. But given the amount of mainland users on their apps, regulators might decide to consider them brokerage businesses in the future, forcing them to apply for licenses.
• Tiger’s IPO prospectus outlined their efforts to comply with their understanding of mainland Chinese law while acknowledging future risks: “We cannot assure you that the rectifications we have made will fully satisfy the relevant regulatory authorities’ requirements.”
• Meanwhile, regulators are encouraging experiments with digital mutual funds: China began issuing fund advisory licenses last October, but only a “handful of firms” will be able to raise enough money for their products, prioritizing established firms with existing funds.

Getting dollars: In order to trade foreign stock, users also have to get ahold of foreign currency. Beijing limits how much money Chinese investors can transfer out of China. If regulations tighten, they could be cut off from maintaining their foreign assets.

• China’s State Administration of Foreign Exchange (SAFE) limits conversions of RMB to foreign currencies to $50,000 per year in an effort to keep wealth within the country, and even this limited exchange needs approval. 
• Futu and Tiger Brokers don’t provide conversion services, and Futu doesn’t ask questions about whether money exchanges have been government-approved. Tiger emphasizes compliance with regulations but admits they can’t guarantee it.
• Futu’s IPO prospectus acknowledges that further currency exchange restrictions would slash their trading volume, leaving their future business with Chinese customers in the hands of the state.

Don’t worry about the trade war: Despite White House recommendations to delist unaudited Chinese firms, brokerage services and the investors they cater to aren’t discouraged about overseas exchanges yet. Unclear Chinese regulation presents far more of a risk, experts told TechNode. 

• Integration between Chinese and US markets is still on the upswing. Twenty Chinese firms went public in the US in the first half of 2020, up 17.6% from the same period last year, according to data from Snowball. 
• “Even with the heightened risk, the fact that Chinese firms continue to come and list in the US in record numbers is indicative of how attractive they consider the US,” said Lysenko. “Whether this continues is anyone’s guess.”

The Hong Kong connection: Hong Kong is still an enticing location for both firms and investors: listing there allows them access to an internationally convertible currency while avoiding both US regulation and mainland capital controls.

• “The increase in US-listed Chinese companies seeking secondary listing in Hong Kong and the surge of high-profile Hong Kong IPOs act as major tailwinds for us to further grow and engage our paying clients,” said Futu CEO Leaf during their Q2 earnings call. 

The biggest risk comes from unclear Chinese laws surrounding brokerage services. If lawmakers perceive outward flows of Chinese money as destabilizing the domestic economy, they could tighten capital controls.

Trade war pressure and a slowing domestic economy could put indirect pressure on regulators to stall any further liberalization for securities brokers. China “is not really in a strong position to feel it can safely lower those capital controls,” Lysenko said.

Alibaba’s fintech affiliate Ant Group filed draft IPO prospectuses for a dual listing on the Shanghai and Hong Kong stock exchanges on Tuesday, the first simultaneous listing for a Chinese tech company. 

Ant Group is reportedly eyeing a $200 billion valuation, which would make it the world’s most valuable fintech company. Such a valuation would top those of some of the world’s biggest banks, including China’s big four. It could be one of the biggest IPOs in recent years, potentially topping Saudi Arabian state-owned oil producer Aramco’s $29 billion listing. 

READ MORE: Ant Group’s dual listing will be one of the biggest IPOs of 2020

Ant Group’s 674-page Hong Kong prospectus reveals the extent of its empire, risk factors related to geopolitical tensions, and financial regulations. Here are five key takeaways. 

1. Impressive profits and growth potential 

In the first half of 2020, the company earned RMB 72.5 billion in revenue, a year-on-year increase of 38%. Digital finance services drove growth, growing 56% year on year to RMB 46 billion in the period.

The company booked a net profit of RMB 21.9 billion in the first half, outstripping its RMB 18.1 net profit for all of 2019, according to the prospectus. 

Monthly active users of mobile payment app Alipay, Ant Group’s key asset, reached 711 million as of end-June, while transaction volume for the app reached RMB 118 trillion during the 12 months ended June 30.

The bulk of Ant Group’s revenue comes from its “Credittech” business, which operates a range of loan services targeting individuals and merchants. Credittech revenue grew 59.5% year on year in the first six months of the year to RMB 28.6 billion, accounting for 39.4% of its total revenue in the period.

Credittech’s key products include Huabei, a virtual credit card service; Jiebei, a micro-lending service targeting individuals; and Mybank Loan, which lends money to small and medium-sized businesses (SMB). The company said in the prospectus that the consumer credit balance of its loan businesses was RMB 1.7 trillion and the SMB credit balance was RMB 400 billion as of the end of June.

2. Looming #techwar

Ant Group warned investors that rising geopolitical tensions could seriously impede its business. It emphasized rising risks of sanctions and trade restrictions on Chinese tech firms from the US government. 

READ MORE:  Techwar: Trump to end transactions with Tencent and Bytedance in 45 days

Such restrictions have the potential not only to banish Ant Group from US markets, but also disrupt its ability to participate in the US dollar-led global financial system, the company said. 

The company singled out its cross-border payments business as exposed to such actions, adding that cross-border payments will be a key area of investment for Ant Group in the future. 

Some analysts have said that new listing restrictions in the US are the very reason that Ant Group didn’t list in the US, as Alibaba did with massive success in 2014. 

In June and July, four Chinese companies, including China’s US IPO pioneer Sina and online travel agency Ctrip, announced plans to delist from the US stock market. Big Chinese tech companies listed in the US have also started dual listing their shares in Hong Kong, signaling a retreat from US financial markets.

3. Jack Ma remains at the helm 

The fintech company has tried to distance itself from Alibaba founder Jack Ma and Alibaba in the past, insisting that it is an independent company. Yet Alibaba shares in New York jumped 3.6% Tuesday on the back of Ant Group’s IPO news. 

The prospectus said the billionaire entrepreneur is Ant Group’s “ultimate controller,” holding a 50.52% stake in the company. Information about Ma’s stake after the IPO is redacted in the draft prospectus. 

The Alibaba and Ant Group founder helms a limited liability partnership, which controls two other partnerships that are Ant Group’s biggest shareholders. 

According to the prospectus, Ma transferred 66% of the controlling entity’s equity shares to Ant Group’s leadership on Aug. 18. He divided it equally between Eric Jing, the company’s executive chairman, Simon Hu, the CEO, and Fang Jiang, a non-executive director. 

Ant Group also recognized that its success is closely linked to Alibaba. The prospectus says Alibaba, mentioned 650 times in the document, is a “major shareholder,” and the prospectus reports that the two have a data sharing agreement. It lists conflicts of interest between the two giant companies as a risk factor, highlighting the fact they have “overlapping” user bases. 

There are “no assurances,” the prospectus says, that Alibaba won’t try to compete with  its fintech twin. 

4. Mounting regulations 

The prospectus warns of tightening regulations in key business segments for Ant Group, both globally and in China: payments, investment, insurance, and credit, among others. 

It makes special reference to China’s tightening anti-monopoly laws: Authorities have in recent years “strengthened enforcement,” it said. 

China’s central bank is reportedly not happy about Ant Group and Tencent’s hold over the domestic digital payments market through Alipay and Wechat. In late July, Reuters reported that Chinese regulators are preparing for an antitrust investigation in the two apps. 

READ MORE: INSIGHTS | China’s digital currency has a long way to go

The digital yuan’s e-wallet is expected to compete with the effective duopoly, possibly breaking Ant Group and Tencent’s chokehold on the market. 

“If we fail to adapt to these new initiatives in a timely manner, our business, financial condition, and results of operations may be materially and adversely affected,” the company said in reference to the digital yuan. 

5. [REDACTED]

Ant Group’s IPO filings are not final, and many pieces of crucial information were redacted, including the number and price of shares, and the company’s total valuation. 

“The A Share [REDACTED] comprises an [REDACTED] of initially [REDACTED] A Shares for subscription, representing approximately [REDACTED]% of our total outstanding Shares following the completion of the H Share [REDACTED] and the A Share [REDACTED], assuming that the [REDACTED] are not exercised.” 

Ant Group in its draft IPO prospectus filed at the Hong Kong Stock Exchange

China Tech Investor is a weekly look at China’s tech companies through the lens of investment. Each week, hosts Elliott Zaagman and James Hull go through their watch list of publicly listed tech companies and also interview experts on issues affecting the macroeconomy and the stock prices of China’s tech companies.

Make sure you don’t miss anything. Check out our lineup of China tech podcasts

Elliott and James welcome Digital Asia Hub fellow Dev Lewis back to the podcast to discuss what a worsening diplomatic relationship between China and India means for Chinese tech companies in India, and what the future of India’s tech landscape will look like. James and Ell also chat about the prospects of IPOs from Ant Financial and Didi Chuxing. 

Please note, the hosts may have interest in some of the stocks discussed. The discussion should not be construed as investment advice or a solicitation of services.

Get the PDF of the China Consumer Index.

Watchlist:

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• Luckin Coffee

Hosts:

• Elliott Zaagman– @elliottzaagman
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Guest:

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China’s first blockchain application platform for electronic company seals went live in Hangzhou on Friday, built using Ant Group’s Blockchain as a Service, the Alibaba-affiliated fintech giant said in a press release.

Why it matters: Official company seals are the cornerstone of China’s corporate bureaucracy, required to validate corporate documents such as contracts. A forged, or stolen, seal can allow someone to take actions on the company’s behalf in a form of corporate identity theft.

• Electronic seals have carried the legal validity of physical seals since 2015, but they are issued by different government agencies with little standardization. This makes management and traceability of the e-seals difficult and risks forgery, Ant Group said.
• On top of that, companies are required to perform cumbersome bureaucratic tasks, such as keeping records of when a seal is used.
• The platform is likely to make corporate management a lot easier, ensuring the authenticity of electronic seals on a tamper-proof chain.
• The move comes at a time when three high-profile Chinese tech companies are fighting over official seals.

READ MORE: INSIGHTS | Corporate intrigue triple header

Details: Hangzhou-based companies can obtain a blockchain seal by applying on a platform, available through both government portals and Alipay.

• The chain will offer tamper-proof, reliable electronic seals.
• The blockchain platform will be linked to Zhejiang province’s existing e-seal system, as well as Hangzhou’s City Brain, Alibaba’s smart city project in its hometown.
• At first, the platform will be available only to companies registered in Hangzhou, the capital of Zhejiang province.

Context: Since Chinese President Xi Jinping praised blockchain in October 2019, China’s local governments have been pushing blockchain technology in governance.

• Just last week, the city of Beijing unveiled an ambitious plan to use blockchain in government services, including cross-border trade, real estate, and banking.
• In the last couple of months, physical seals have been at the center of corporate power struggles, since control of a seal allows someone to issue official-seeming documents. At Bitmain, the world’s largest bitcoin rig makers, two co-founders fighting for control produce documents stamped by different seals. Each claims his seal is the one that represents the company.
• Hangzhou is often somewhat ahead of other cities in integrating technology in city governance, often in partnership with locally headquartered tech giant Alibaba.
• The company launched the Hangzhou City Brain in 2016, which big data it law enforcement, traffic management, and health services, among other areas.
• Ant Group, formerly known as Ant Financial, is Alibaba’s fintech affiliate. It operates China’s most popular mobile payments app, Alipay, and has invested in blockchain technology since 2015.

Ant Group, Alibaba’s fintech affiliate, has started the paperwork for concurrent listings on Shanghai’s Nasdaq-style STAR Market and the Hong Kong Stock Exchange, the company announced on Monday.

Why it matters: Ant Group is reportedly targeting a $200 billion valuation in one of this year’s biggest IPOs.

• If Ant Group reaches such a market capitalization, it will be the world’s most valuable fintech company.
• Reaching a $200 billion valuation would also mean that Ant Group’s market cap is higher than that of most of the world’s banks, including state-owned Bank of China and China Construction Bank.
• While secondary listings have been popular among China’s tech giants in the last year, this is the first time a privately-held Chinese company has attempted to list simultaneously on two stock exchanges.

Details: Ant Group, which operates Alipay, China’s most popular mobile payments app, hinted that it wants to be more than a fintech company in a press release announcing the listings.

• The company aims to build “the infrastructure and platform to support the digital transformation of the service industry,” according to the announcement.
• Ant Group will use the funds from its IPOs to further its digitization of services in China, expand into global markets, and invest in research and development, the company said.
• “Becoming a public company will enhance transparency to our stakeholders, including customers, business partners, employees, shareholders, and regulators,” Ant Group Executive Chairman Chen Jing said in a press release.

Context: In its last round of private fundraising in June 2018, Ant Group’s valuation climbed to $150 billion according to analysts.

• Bank of America values Ant Group at $210 billion, while JPMorgan estimates the company’s valuation to be $218 billion, the South China Morning Post reported.
• In early 2020, Ant Group was reportedly looking to raise $200 billion through private sales of shares. The company denied any plans for an IPO at the time.
• In early July, Reuters reported that Ant Group had given up plans for the two concurrent IPOs. The company planned to list only in Hong Kong because of “a smoother listing process,” Reuters said citing people familiar with the matter.
• Many of China’s US-listed tech companies, including Alibaba, have announced secondary listings in Hong Kong in the past year as they look to tap Asian capital markets.
• On July 16, the Semiconductor Manufacturing International Corporation, a Chinese chip manufacturer, had one of the biggest IPOs in China’s history. Shares in its secondary IPO on Shanghai’s STAR Market surged 200%, while its stock price in Hong Kong fell by 17% on the same day.
• Ant Group’s announcement is a big win for Shanghai’s new tech board, which aims to bring homegrown companies back to Chinese stock exchanges.

Alibaba’s fintech affiliate, Ant Group, has teamed up with Chinese shipping giant COSCO to bring blockchain technology to the shipping industry, the company said on Monday.

Why it matters: Blockchain could streamline the complicated logistics involved in maritime transport, including hurdles from multiple regulators, customs agencies, and harbor authorities.

• The new deal brings Ant Group, formerly known as Ant Financial, together with the world’s third-largest shipping company to capitalize on the industry that supports up to 90% of global trade.

Details: Ant Group will explore how Ant Blockchain, its proprietary blockchain technology, can transform logistics in the global maritime industry, according to a statement sent to TechNode on Monday.

• Using blockchain to secure shipping information like container records and logistics certificates, Ant Blockchain “significantly improves transparency while reducing costs,” it said.
• The company did not give details as to how it will apply the technology to shipping.

Context: Alibaba and its payments affiliate Ant Group hold the most blockchain-related patents worldwide, a study by the China Patent Protection Association found, followed by US-based IBM, which works with Danish APM-Maersk.

• COSCO became a shareholder of blockchain consortium Global Shipping Business Network in March.
• Alibaba started using the technology for its cross-border e-commerce business in early 2018.
• Ant Blockchain is the biggest enterprise-oriented blockchain platform in China. It can process up to 1 billion transactions per day and support 1 billion users, according to Ant Group.
• Industry giants in China and abroad have used Ant Blockchain for supply chain management and logistics since 2018.
• Ant Group opened the platform in April to small and medium enterprises, allowing them to build their own applications.
• The partnership is up against stiff competition. The world’s largest shipping company APM-Maersk and IBM launched in 2018 a blockchain ecosystem for handling logistics.

Correction: an earlier version of this story incorrectly stated that Alibaba, not Ant Group, partnered with COSCO.

Alibaba-backed online lender Mybank announced on Tuesday a five-year plan to expand its loan services to more small and micro enterprises.

Why it matters: Micro and small businesses—among the hardest hit during the Covid-19 lockdown—play a central role in China’s economy.

• Small and micro enterprises account for over 90% of business entities in China, and contribute 80% of national employment and 60% of China’s GDP, according to data from the People’s Bank of China.
• Likewise, tech giants including Tencent, Meituan, Pinduoduo, and JD are also ramping up their efforts to support micro and small enterprises by offering low-interest or interest-free loans.

Details: Mybank, an online private commercial bank under Alibaba’s fintech affiliate Ant Group, said in a statement that it plans to support 10 million micro and small enterprises over the next five years. It will leverage supply chain finance and expand rural lending efforts as part of the plan.

• Under the plan, the Zhejiang-based bank is offering interest-free vouchers for business loans totaling RMB 300 billion ($42.4 billion). It will cooperate with 2,000 county and village managers to provide loans in rural areas.
• Through partnership with China’s three policy lenders—China Development Bank, the Export-Import Bank of China, and the Agricultural Development Bank of China—Mybank has sent three batches of one-month interest-free vouchers in the past month, a company spokesperson told TechNode. Businesses that receive a voucher don’t have to pay interest for the month.
• RBM 30 billion worth of interest-free vouchers will be distributed before the end of this year, the company said.
• Special attention has been given to women entrepreneurs with a pledge to serve 40 million female business owners with the aim to provide more economic opportunities.
• Mybank and its partners have served 29 million (in Chinese) small and micro enterprises in China as of June 2020, including street vendors, Simon Hu, CEO of Ant Group and chairman of Mybank, said at the Mybank Microfinance Partner Conference on Tuesday.
• The average loan is RMB 36,000 and 80% of the companies had never previously received business loans from a bank.
• Micro and small businesses in China have shown resilience during the Covid-19 pandemic, with 98% of them repaying their loans on time, according to Hu.

Context: Established in June, 2015, Mybank, officially known as Zhejiang E-Commerce Bank Co. Ltd., is an internet-only lender majority-owned by Alibaba.

• China’s online banks, led by Alibaba’s Mybank and Tencent’s Webank, are seeing rapid growth thanks to wide application of new technologies and the popularity of mobile payments in the country.

Correction: an earlier version of the story referred to Ant Group by an earlier name, Ant Financial.

Bytedance’s mega app Tiktok has been removed from Android and Apple app stores in India, its second-largest market, following a Monday ban on 59 Chinese apps on national security concerns. The ban comes two weeks after a border clash with China left 20 Indian soldiers dead. 

Among those blacklisted are popular Chinese apps like Tiktok, Wechat, Baidu Maps, Baidu Translate, Sina Corp’s microblogging platform Weibo, as well as mobile games Mobile Legends Bang Bang and Clash of Kings. Other banned apps popular in India include Chinese-owned e-commerce platforms Shein and Club Factory, Bytedance’s social media app Helo, and Alibaba’s UC Browser. 

A door slammed shut: Losing access to India’s market is a blow for Chinese companies like Bytedance, which aim to ride India’s rapid growth in mobile internet penetration.

• India’s mobile app market is still developing, and rapidly. Smartphone users in India are projected to double to 1.25 billion by 2024 from 610 million in 2018, according to India-based think tank Gateway House. Between 2016 and 2018, the number of app downloads increased by 165%.
• Some companies have made big bets on the Indian market: Alibaba’s fintech arm Ant Financial has invested close to $2.7 billion in seven companies, while Tencent has spread $2 billion across 15 firms.
• A big loser from this decision will be Bytedance, the owner of Tiktok. According to Sensor Tower, 30% of Tiktok’s more than 2 billion global downloads come from India.

The companies react: Bytedance told TechNode that its team of 2,000 employees in India “is committed to working with the government to demonstrate our dedication to user security and our commitment to the country overall.”

• Club Factory, which has more than 100 million monthly active users in the country, told TechNode that it was compliant with privacy practices and had “provided direct employment to hundreds of people in India.”
• “We have always been willing and continue to remain committed to working with the Government to resolve any concerns,” the company added.
• Spokespersons from Tencent, Xiaomi, and Baidu declined to comment. Alibaba had not responded to requests for comment as of publication.

Collateral damage: Many analysts see this decision as a direct reaction to the border clash, bolstered by other factors like protectionism.

• “I would say that it’s more of a nationalist response,” said Hamsini Hariharan, host of the States of Anarchy podcast, which focuses on global affairs and Indian foreign policy.
• She continued, “I think the government wanted to just send a message that they weren’t taking the border lying down, and they figured the Chinese apps were a good way to do it.”
• Deep K. Datta-Ray, visiting senior fellow at the Singapore-based S. Rajaratnam School of International Studies, concurred that the ban was “in the first instance a tit-for-tat response to Chinese actions along the border.”

Protecting our own: However, Datta-Ray added that “these actions are in keeping with a generally isolationist and nativist approach” on India’s part, as seen in moves such as its withdrawal from the mega free trade agreement known as the Regional Comprehensive Economic Partnership in late 2019.

Nationalist tide: The app ban follows a China-India border clash in the Himalayas that left 20 Indian soldiers dead, the first time in nearly 50 years that Indian soldiers had been killed on the border.

• That clash stoked anti-China sentiment in India, with a former Indian ambassador to China calling it a “turning point,” although not a “breaking point,” in Sino-Indian relations.
• In May, an app called “Remove China Apps” rose to the top of India’s Android store amid growing China-India tensions. That app was itself removed from the Google Play store on June 3.
• On June 17, national intelligence agencies in India asked the government to block 52 mobile apps by Chinese developers, informing the current ban.
• People in India “have already been talking about boycotting goods from China,” Hariharan told TechNode, and so “this current ban of the apps is just part of that nationalist wave.”

Swing state, swung: In the context of US-China tech tensions, some analysts have interpreted this ban as a loss for China.

• For China, India “was almost a tech ‘swing state,’” Rush Doshi, director of the China Strategy Initiative at the Brookings Institution, said on Twitter. “But with bans on these apps and new restrictions on Huawei, that strategy is seriously imperiled.”
• In April 2020, Chicago-based think tank Macro Polo compared the top 10 apps from different countries in 2015 and 2019, and concluded that “Chinese apps have taken the lead in by far the largest emerging market: India.”
• In 2015, three of the top 10 apps in India were from China. By 2019, that had risen to six: Tiktok, video-based social media platform Likee, Bytedance’s Helo, file sharing app Shareit, and Alibaba’s UC Browser and video sharing app Vmate.
• Though some of those names may not be familiar, they totaled 982 million downloads combined during the year.
• However, India has swung back and forth on China, and this may not be the closing act. In April 2019, Tiktok was banned in India for two weeks for allegedly spreading pornography, but made a swift comeback upon its return to the app store.

Firewall goes up: It isn’t entirely clear how the ban will be implemented. Some apps have already been taken down from app stores, but actively restricting their use would require additional steps.

• Tiktok appears to have been removed from the Apple and Google stores in India, TechNode sources in India have confirmed.
• However, that won’t stop people who have already downloaded the apps from continuing to use them. Some reports say to expect restrictions from internet service providers that will require virtual private networks (VPNs) to get around. 
• The Indian Express states that this notice “is expected to be followed by instructions to Internet service providers to block these apps,” but it’s unclear when that will be implemented. 
• As of now, TechNode sources in India are able to use apps like Wechat and Cam Scanner without a VPN, and can still access e-commerce websites like Shein from desktop browsers.
• According to Datta-Ray, “India has chosen a low-denomination item, apps, and a masked response… because China is by far, in a stronger position.” At the end of the day, that means despite an intensification “in name,” “business might very well continue as usual.”

In 2010, after several failed projects that included Facebook-clone Xiaonei and the Twitter-like Fanfou, serial entrepreneur Wang Xing launched a new startup, Meituan. With his eyes set on e-commerce, Wang focused on online sales of services—a less saturated segment of e-commerce which avoided head-on competition with Alibaba, the undisputed e-commerce giant.

However, Alibaba never lost sight of its goal to build an empire spanning all e-commerce sectors. The subsidy-fueled food delivery war between Meituan and Alibaba-backed Ele.me has only recently leveled off. Alibaba has reinvigorated its bet by expanding its offensive to the broader local lifestyle services market, with popular payment app Alipay at the center.

Alipay: from payment tool to lifestyle multi-purpose app

In what Alipay CEO Simon Hu dubbed the “most important development in Alipay’s 15-year history,” the payment app has upgraded local lifestyle services such as food and grocery delivery, featuring the channels more prominently in an app update released on March 10.

With its slogan changed from “Pay with Alipay” to “Live @ Alipay,” the app is transforming from a fintech and payment tool to a Meituan-like all-services app featuring third-party service providers that offer all kinds of lifestyle conveniences for its users.

Alongside the update, the company announced a three-year plan to support the digital transformation of 40 million service providers across China. Alipay says it is responding to rising demand for local lifestyle services on its platform, which has seen the number of searches for lifestyle services jump 300% in 2019 compared with 2018.

Although both Ele.me and Koubei have their own apps, they rely heavily on Alipay—which has 1.2 billion users globally—to acquire new customers. Eleme acquired 48% of its new customers from Alipay in the quarter ending Dec. 31, according to the company.

On March 16, Alibaba’s local lifestyle arm (a unit that merged Ele.me and Koubei in 2018) set a series of goals to support the transition. Through the Alipay tie-up, the unit pledged to:

• Bring more than 100 million visitors to merchants every day.
• Offer a commission fee 3% to 5% lower than other platforms for food delivery services. (Meituan has been criticized by regional catering associations for raising commission fees to more than 20% during the Covid-19 outbreak.)
• Help 5,000 local lifestyle service providers open flagship stores on its business-to-customer marketplace, Tmall.
• Provide free services for mini-program operators who use the catering management solutions Keruyun, a platform Alibaba acquired in 2019.
• Help 1 million merchants to upgrade their operational and management platforms.
• Establish Alibaba Local Lifestyle Service University, offering 1,000 online courses within three years to train 10 million people in catering, logistics, and retail.

The company has been gearing up for the transformation since November with the launch of its “New Services” strategy (link in Chinese), an initiative designed to increase services merchant efficiencies by digitizing their operations. In addition, the firm has rolled out operating systems for merchants and supermarkets.

Meanwhile, personnel changes were made to prepare for the shift. Alibaba’s local lifestyle services have reportedly been taken over by Ant Financial CEO Simon Hu, who helms Alipay’s offerings—including its lifestyle services. Instead of just attracting users with food-delivery services, a combination of the two businesses could help Alibaba increase and retain users by directing them to Alipay, a place that offers all kinds of convenience, e-commerce industry watcher Li Chendong told local media.

Coronavirus accelerates local lifestyle services boom

China’s local lifestyle service market is expected to reach the RMB 1 trillion mark soon, according to a report released by Iimedia Research in September 2019. Some segments of the market have grown faster than others. Food delivery—mainly restaurant takeout and delivery—is the biggest chunk, with a market size of RMB 284.5 billion in 2019, Iimedia’s data showed. The fresh produce e-commerce market is expected to be worth RMB 162 billion; the community services market, ranging from housekeeping to laundry, will reach RMB 231.61 billion in 2019.

Although food-delivery growth is slowing, user demand for fresh produce, groceries, medicines, and others surged during the Covid-19 epidemic as millions remained isolated at home.

Meituan has been riding the wave with its sales from fresh produce—vegetables, seafood, and meats—jumping more than 200% year-on-year between Feb. 1 and Feb. 20.

“Amid the ongoing coronavirus outbreak, we have also seen how digital technology can be used to help service providers become more agile and respond effectively to the fast-changing market environment,” the Ant Financial CEO said in a statement. 

According to the company, more than 1,200 developers answered its call to create mini-programs aimed at providing support during the outbreak for grocery delivery, legal and medical advice, and other public services.

The ride-hailing firm Didi Chuxing also introduced home delivery options to its app in two major cities during the Covid-19 outbreak. Previously, Didi had changed lanes by entering the food-delivery market to counter Meituan’s expansion into ride-hailing in 2018, but that business quickly failed.

What it means for Meituan

With the prominent positioning of the food delivery, restaurant reviews, and travel and ticketing channels, the app landing pages for Meituan and Alipay look increasingly similar.

This head-to-head competition is reminiscent of China’s recent food-delivery war. With most users in major metropoles well-acquainted with on-demand delivery, lower tier-cities are where service platforms are fighting most fiercely for users.

In this regard, Meituan has been taking the lead; 73.7% of users rated Meituan as their first choice for food delivery, while Ele.me and Koubei accounted for 24%, according to a report from mobile data service provider Jiguang.

Meanwhile, Alibaba is also shifting focus to the lower-tier markets. The company said the gross merchandise volume from local lifestyle businesses in less-developed areas grew about 40% year-on-year in the last three months of 2019.

User acquisition is just one part of the story, however. The push for the digitalization of offline services is in large part a competition to attract merchants to join their platform. Here, Alipay has an edge—because  Alibaba launched a series of support measures for small- and medium-sized enterprises in its 2B shift.

The practice of subsidizing discounts for users may still happen, but there are indications that neither of the companies, nor the investors backing them, have much appetite to offer irrational cash-burning rebates after seeing unimpressive results from spending millions of RMB. Ele.me CEO Wang Lei, who pledged to offer RMB 1 billion subsidies in July and August 2018, said a year later that the food-delivery market isn’t “healthy” and that there will be no more crazy subsidy wars.

In the meantime, Meituan is also testing an expansion into the selling of physical goods online. Since 2018, the company has listed Hailan Home, a menswear fashion brand, on its platform. It recently entered an agreement with 72 physical bookstores, allowing users within 10 kilometers to place orders and have books delivered within 30 minutes.

With both platforms expanding beyond their core businesses, the competition between China’s largest and third-largest tech firms is escalating to another level.

Xiaomi has said that it will begin trials of its virtual bank Airstar, in a signal that the smartphone maker is looking to grow its presence in consumer finance and compete with other Chinese tech giants like Ant Financial and Tencent. 

Why this matters: While best known as the world’s fourth-largest smartphone brand, Xiaomi has made its fintech ambitions clear. The virtual bank is a JV with AMTD Group, Asia’s largest independent investment banking firm, and Xiaomi owns 90% of the shares.

• Xiaomi’s ambitions to leverage its foothold in IoT—its platform is connected to 151 million active mobile devices, which it says is the largest in the world—and broaden its existing fintech offering in China and beyond.

Details: The pilot allows 2,000 employees from Airstar, Xiaomi, and AMTD Group and their friends and relatives to try out (in Chinese) virtual banking tools and give feedback.

• Airstar presents itself as a zero service fee retail business. Hong Kong residents can create an account in five minutes with no minimum deposit required.
• Airstar will start with two products. One offers an interest rate of up to 1% per annum for saving deposits of between HK$500,000 and HK$1 million. It protects deposits up to a maximum amount of HK$500,000.
• Customers can also place savings in time deposits and choose their deposit maturity dates themselves, such as eight, 19, or 27-day time deposit. They can settle fixed term deposits at any time in advance without charge. 
• Unsecured lending products will be available to customers with transparent pricing. Interest will accrue on a daily basis. The loan price is transparent and the interest rate compounded daily. Customers can repay in advance without paying any handling fees. 

Context: The Hong Kong Monetary Authority’s Fintech Supervisory Sandbox will oversee the pilot.

• The HKMA issued eight virtual banking licenses to companies including Ant Financial, Tencent, JD.com and insurance giant Ping An. 
• AMTD is planning an initial public offering of its digital assets for later this year. It wants to serve retail banking customers and small and medium enterprises in the wider Asia region, and is currently competing for licenses in other jurisdictions. 

Ant Financial, Alibaba’s fintech arm, has set up a corporate credit rating company for small and micro enterprises.

Why it matters: The new venture brings Ant Financial closer to the comprehensive offerings of traditional banks, with the distinct advantage of having access to the Taobao marketplace—a massive pool of small and micro enterprises.

• By performing financial risk assessments, the credit rating arm can help provide hard-to-come-by loans to millions of small business owners.

Details: Ant Financial Credit Rating is wholly owned by Ant Financial and funded with RMB 500 million (about $70.5 million) in capital, according to Chinese media reports. The company was listed on China’s Na­tional Cor­po­rate Credit In­for­ma­tion Sys­tem (NCCIS), the national corporate registry database.

• Shao Wen­lan, head of Alibaba’s personal credit rating arm Sesame Credit, will head the venture, according to media reports.
• According to its NCCIS listing, the company will offer social, financial, and economic consulting services. It will also offer technical services to lend developmental support in fields such as IT, data storage, data processing, and software, media reported.

Context: The corporate credit industry has increasingly crowded, with 128 registered companies, according to Beijing News.

• Ant Financial and Sesame Credit offer extensive and widely used financial services for individuals, including digital payments, credit lines and credit scores.
• In 2015, Sesame Credit was enlisted by the central bank of China to launch personal credit operations, along with Tencent Credit and six other fintech companies.
• The move is in line with Ant Financial and Alibaba‘s wider pivot towards business-facing operations, including a productivity and collaboration tool.

Chinese gaming and social giant Tencent has rolled out “Fen Fu,” an embedded credit feature which allows its 1.1 billion WeChat users to “buy now and pay later.”

Why it matters: Fenfu is Tencent’s foray into microloans, a service which Alipay offers users with its Huabei feature, and JD.com with its Baitiao product.

• This rollout shows Tencent’s strategy in building a digital ecosystem in which users have easy access to financial services within the WeChat app itself. 
• In recent months, Meituan and Alipay have set out their long-term strategy of providing comprehensive digital lifestyle services, fully integrated into their existing apps.
• Tencent’s gains in fintech show that the competition to serve all user needs will only heat up. 

Details: Announced last year, large numbers of users had access to the Fen Fu function as of last week (in Chinese)

• Users can rely on Fen Fu to pay for eating out, shopping, and watching movies but cannot use it to send payments to other WeChat users. 
• When paying, users do not have to withdraw credit in advance. They can directly select Fen Fu as an option when paying. 
• Users will pay a daily interest on money borrowed and can repay the full amount at any time. 
• Fen Fu has no fixed interest rates nor payment due dates—differing from other installment payment products.
• Instead, interest rates drop whenever money is paid back. 

Context: In Q4, Tencent reported fintech and business service revenue of RMB 29.9 bil­lion (around $4.2 billion), growth of 39% year on year, accounting for 28% of to­tal rev­enues for the quar­ter.

• WeChat Pay rival Alipay has been expanding its cross-border partnerships and broadening its financial services ecosystem in collaboration with other user-rich platforms.
• Microlending took off in 2016, and is particularly popular among China’s younger consumers: more than half (in Chinese) borrow money to finance their daily consumption.

Alipay is looking to attract workers looking for employment to its platform and is offering contactless job fairs that it says so far 60,000 companies have registered for.

Why it matters: Alipay is competing with Meituan and WeChat to gain share in China’s lifestyle services market.

• The Covid-19 outbreak prompted cancellations of all public events including job fairs while companies have shuttered temporarily.
• Those laid off from their jobs due to the outbreak as well as a fresh crop of graduates will be looking for work in the coming months.

Details: The job fair is organized in conjunction with China’s Ministry of Human Resources and Social Security, according to a Chinese media report.

• Participating companies include consumer electronics company Haier, insurance provider Ping An, appliance manufacturer Gree, and Alibaba itself.
• More than 100,000 jobs were advertised, and Alipay has said the fair will last until the end of June.
• Alipay reported that 1.64 million people have gained employment through its platform since the outbreak started, taking up jobs as mini program developers, food delivery drivers, and online service desk personnel.
• Zhang Yanan, general manager of the Alipay Education business division said that there were special sections within the online job fair designated for Hubei university graduates, and small and medium enterprises.

Context: The National Bureau of Statistics said that China’s urban unemployment rate increased in February to 6.2%, its highest rate ever, from its January rate of 5.3%, meaning around 5 million workers lost their jobs.

• Zhilian Zhaopin, a recruitment website, reported that demand for new hires from large enterprises has started to fall, and that small and micro enterprises have found it most difficult to recover.
• On March 16, the Ministry of Commerce reported that 60% of service industry companies were back to work (in Chinese).
• New prospective additions to the job market are incoming—figures from the Ministry of Education project that this year’s crop of fresh graduates number at 8.74 million, an increase of 400,000 from last year.

Transferwise announced today that its users will be able to send Chinese yuan to Alipay users from 17 currencies, expanding the reach of remittance services for both services.  

Why it matters: High fees for sending remittances through banks—an average of 7% globally—leave an opening for services which add convenience and cut costs. 

• British firm Transferwise has 6 million users, compared with Alipay’s 1.2 billion users globally, and this partnership helps both gain ground in the billion-dollar global remittance business. 

Details: In its statement announcing the partnership, Transferwise said that “money will be sent with the real exchange rate—like the one you see on Google.” 

• Transferwise users can send up to five transfers to Alipay accounts per month, capped at RMB 31,000 each (around $4,400), with an annual limit of RMB 500,000.
• The recipient Alipay account must belong to a Chinese citizen and have a bank card linked. 
• Kristo Käärmann, co-founder and CEO of Transferwise, said that the partnership was “one of the most requested features from our users.”

Context: The partnership with Transferwise is far from Alipay’s first deal on cross-border transfers—a similar integration with Worldremit was announced in January, and one with Finablr (holding company for Travelex and UAE Exchange) in November last year.

• Partnering with Transferwise signals Alipay’s continued willingness to work with companies which already have market share and access to the European market, which some analysts believe have fewer financial regulatory pitfalls than the US. 
• Ant Financial has also launched its own initiatives including a blockchain-based cross-border remittance service for users in Hong Kong and the Philippines. 
• Users in China are the second largest region for remittance—in 2018, $67 billion flowed in.
• Remittances to low- and middle-income countries are on track to reach $550 billion in 2019 and $597 billion by 2021, according to the World Bank. 

Apple is reportedly going to include a Chinese mobile wallet in Apple Pay in its upcoming iOS 14 update with addition of Alipay to its roster of accepted payment methods.

Why it matters: Chinese payment apps like Alipay and WeChat Pay are looking to expand overseas. 

• Raymond Wang, partner at Roland Berger told TechNode that the deal will drive traffic and users to Alipay, while Apple retains influence over its ecosystem. 
• Apple Pay is on track to account for a tenth of all global card transactions, and generated $12.7 billion in revenue in the fourth quarter.
• To push people to setup their Alipay within their Apple Pay wallets, “Alipay still needs to have lots of marketing, promotions, and business development with shops,” Wang said. 

Details: Apple news blog 9to5mac reports that leaks of iOS 14 code point to Apple Pay supporting the Chinese mobile payment platform. 

• The developer community expects Apple to announce the launch of iOS 14 in June at the WWDC 2020, which will be delivered online. 
• The integration of Alipay “does not mean that Apple will not cooperate further with other mobile pay players,” said Wang, who added it was likely that WeChat Pay would be vying for inclusion. 
• An Alipay representative declined to comment. 

Context: Digital wallets are not only vying to replace physical counterparts, but add non-payment functions to retain users and increase the number of services users open their apps for, too.

• Last week, Ant Financial announced plans to support millions of third parties in providing digital lifestyle services in its Alipay app.
• Ant Financial has bought stakes in other payment apps, with the Swedish payment app Klarna, its most recent move. 
• As of June 2019, Alipay had 1.2 billion users globally, and aims to serve 2 billion users over the next ten years.
• Its domestic competitor Wechat Pay, is embedded into WeChat which has 1.1 billion users.
• The Chinese mobile payment platform has been looking to raise its international profile by partnering with digital wallet companies.

Ant Financial wants its Alipay mobile payment app to support millions of other service providers in a bid to compete with Meituan and WeChat in digital lifestyle services.

Why it matters: The competition to build mini app ecosystems is heating up. This marks Ant Financial’s bid to rival Meituan’s all-purpose app and WeChat’s mini programs in being a one-stop-shop for “contactless services.”

• This would mean users don’t have to leave the app to access many other conveniences.
• Meituan launched a credit payment feature in January, marking its efforts to gain more fintech turf, competing head-on with Alipay, Tencent, and JD.com.

Details: At the Alipay Partner Conference on Mar. 10, Ant Financial announced a plan spanning the next three years to create a digital ecosystem. It will upgrade the Alipay app and tailor it to a multiple service platform.

• Ant Financial wants to expand beyond financial services into a platform featuring third-party service providers which provide other lifestyle conveniences for its users, and reward them for it.
• It will offer merchants growth assistance programs which include loan services.
• “The service sector in China is still in the nascent stages of digital transformation, and that means it has huge untapped potential,” said Ant Financial CEO Hu Xiaoming.
• The payment app said 1,200 developers answered its call to create mini programs that countered the impact from Covid-19, resulting in grocery delivery, legal and medical advice, and other public services.
• A mini program launched by Beijing-based startup Meicai links farmers with consumers and restaurants, and had more than 800,000 users, which its CEO attributed to exposure on Alipay.
• The homepage will use algorithms to recommend services to users, so that each user’s app is tailored to their requirements.

Context: In 2019, the number of searches for lifestyle services within the Alipay app has increased 300% compared with 2018.

• Covid-19 has consumers relying on online food delivery, medical consultations, and remote learning while they are stuck at home.
• Hu said that 80% of China’s service industry is not yet digitized.
• WeChat was a first-mover on mini programs in 2017, and Alipay followed suit in 2018.
• Mini-programs have become strategically important to the payment platform, amassing 500 million monthly active users last year.

Ant Financial, the fintech arm of Chinese online marketplace Alibaba, bought a small stake in Swedish payments app Klarna, the startup said on Wednesday. 

Why it matters: Ant Financial has embarked on a series of moves to tap European consumers, as the Chinese online payments market is effectively saturated by the WeChat Pay and Alipay duopoly. 

• Tencent is also looking to expand into Europe, which is becoming a new arena for competition between China’s biggest apps. 

“Alipay, and the wider Alibaba Group, have truly set the global pace on retail innovation and the app economy. We are delighted in this confidence shown in Klarna in defining the future of payments and shopping.”

— Sebastian Siemiątkowski, Klarna CEO

Details: The investment accounts for less than 1% of Klarna’s equity and was comprised of existing and new shares, Reuters reported citing a source familiar with the matter. 

• Klarna offers a “buy now, pay later” credit service, enabling shoppers to purchase goods and pay in 14 to 30 days. 
• Klarna’s service is already available on Aliexpress, Alibaba’s overseas e-commerce platform. 

Context: Ant Financial announced a partnership in November with French startup Worldline to bring Alipay into Europe to provide payment services to Asian tourists. At least another six European mobile wallet platforms, together accounting for 5 million users, are partnering with Alipay to offer payment services on the continent. 

• One of Ant Financial’s biggest moves into European fintech was the $700 million acquisition of UK-based payments group WorldFirst, in February 2019.
• Tencent, whose WeChat Pay is Alipay’s biggest competitor in Chinese digital payments, has also been making moves into Europe. 
• In 2018, Tencent led the Series B of German online bank N26, which raised $160 million. In January 2020, it led another Series B, this time for French digital payments app Lydia, which raised $45 million. 
• Founded in 2005, Klarna is valued at $5.5 billion. According to the Financial Times, Klarna’s investors include global payments provider Visa, New York investment firm BlackRock, and venture capital group Sequoia Capital. 
• The Swedish company says it is powering 200,000 retailers around the world, including H&M, Asos, Expedia Group, Ikea, Farfetch, Adidas, Spotify, Samsung, and Nike. 
• It also counts 80 million customers globally, and “has more than 200,000 more monthly app downloads than the nearest US competitor.”
• In 2019, Klarna’s revenue increased by one-third on an annual basis to $740 million. But a push into the US market and heavy credit losses led to a net loss, according to the Financial Times.

More than 100 cities in China have adopted the QR code health rating system developed by mobile payment platform Alipay, one version of an app that is expected to be rolled out across the country next week.

Why it matters: The health code system is the quick answer the government was seeking to help contain the spread of the Covid-19 epidemic, though some loopholes remain.

• The system enables the government to track at-risk individuals and keep a close eye on everyone else as businesses resume operations.
• The system will also allow more mobility. Some cities have been locked down over the past month, barring visitors or even residents without the proper paperwork. Many have imposed measures such as travel restrictions. Workers all over the country have found themselves stranded in their hometowns, unable to return to work.

Details: Alibaba’s fintech affiliate Alipay said on Wednesday that all cities in eastern Zhejiang, southwestern Sichuan, and southern Hainan provinces have adopted the health code system it developed.

• The platform, versions of which are developed by Alipay, Tencent, and other tech firms, produces colored QR codes based on user responses to questions about travel over the past 14 days, and whether the individual has traveled to virus-hit areas or has come into contact with infected cases.
• To determine contact with infected individuals, the government launched an app two weeks ago that allows people to check whether they have been in proximity to an infected case. However, the parameters used to define “proximity” is unclear.
• To register, individuals provide their name, ID number, phone number, and answer a series of questions including physical health and travel history. Public data is used to verify self-reported information.
• Residents can now show the QR codes at community or highway checkpoints.
• Hangzhou, the capital of Zhejiang province, became the first to adopt the QR code system on Feb. 11. According to Ant Financial, 15 million people registered with the system in Zhejiang alone.
• Sichuan province officially adopted the system on Tuesday.
• Chongqing municipality launched the health rating system on Wednesday with the help of Alipay and Tencent, according to a government announcement.

Context:  Alipay said on Sunday it is ramping up development of the health code system in time for launch next week.

• The system generates green, yellow, or red code based on answers to a few basic questions. Individuals with a green code are allowed to move around the city freely, yellow codes require a seven-day quarantine, and red requires a 14-day quarantine.
• Yellow and red codes can be converted to green after individuals complete quarantine periods with daily check-ins on the app.
• WeChat owner Tencent also rolled out a similar health code system now being used in Shenzhen that will soon be adopted by more cities in southern Guangdong province.

Chinese tech behemoth Alibaba has unveiled a number of measures to support smaller sellers in its ecosystem as the economic impact from the novel coronavirus outbreak begins to set in, including offering service fees waivers or reductions and financial assistance.

Why it matters: The coronavirus epidemic that has immobilized China is hitting the country’s already-slowing economy, the growth rate of which has inched down to a multi-decade low (in Chinese) in 2019. Business interruption, rising costs, and consumer panic caused by the outbreak are pressuring small business owners.

• Alibaba’s efforts to support small- to medium-sized sellers may help it to retain merchants in a battle to fend off competition from rivals like Pinduoduo.

“Now, the second battle is upon us: Economic development must continue, lives must go on and small-and-medium sized enterprises must survive.”

—Alibaba statement

Pinduoduo boosts support for smaller merchants during crisis

Details: The support program covers every major business segment in its ecosystem from its core online marketplaces, logistics, financial offerings to local life services. Merchants can apply for support as soon as their operations resume, according to the company announcement on Monday.

• With the goal to minimize merchant operational costs, the company is waiving the platform service fee, rental fees, and commission for merchants on online marketplace Tmall, logistics arm Cainiao, and lifestyle unit Koubei for a period ranging from two to six months.
• Low-interest loans will be provided through Mybank. The Ant Financial-backed online bank will provide 12-month free or low-interest loans totaling RMB 10 billion ($1.4 billion) to Taobao and Tmall merchants from central Hubei province, the epicenter of the outbreak. Another RMB 10 billion in loans are allocated to merchants located outside of Hubei.
• Taobao, Tmall and Cainao have co-launched a RMB 1 billion fund for online sellers to offset rising supply chain and logistics service costs.
• Flexible job opportunities at the company’s operations like Hema and a number of other sectors including dining, hospitality, movie theaters, and department stores are on offer to help shore up incomes.
• All offline store operators can join Taobao Livestream without prerequisites and can use its operational tools free of charge.
• Enterprise software Dingtalk is offering its “Work from Home” function free of charge.

Context: Other Chinese tech companies like Meituan and Pinduoduo had already announcement supportive small business measures amid the crisis.

• Alibaba rolled out the “A100” program to help companies embrace digital transformation in January last year.

Ant Financial is offering access to its team collaboration tool Yuque to small businesses free of charge, the company said Tuesday, as much of China’s workforce remain at home to stem the spread of the deadly novel coronavirus which has immobilized the country since late January.

Why it matters: Fallout from the virus outbreak has created an unexpected opportunity for enterprise service providers to acquire new users by offering free services. Alibaba’s DingTalk, Tencent’s WeChat Work, Bytedance’s Feishu, and Huawei Cloud’s WeLink all recently began opening up communication and video conferencing features to businesses for free.

• On Monday, the first day back to work after an extended Spring Festival holiday in China, the sheer volume of traffic generated by the hundreds of millions working from home temporarily paralyzed video conferencing services on major platforms.

Details: Ant Financial said the virtual office features on Yuque will remain free of charge to small businesses and organizations for “an extended period of time.” Yuque is a professional cloud-based platform for file-sharing, editing, and management.

• Yuque’s virtual workspace designed for SMEs, Yuque Team (our translation), allows for 50 participants. The tool will be offered free of charge for an extended period without a cap on the number of text files and tables that can be shared between team members. Non-profit organizations also qualify for the free access, the company said.
• Yuque Space, the virtual workspace designed for larger organizations, offers a standard three-month trial period free of charge.

Context: The enterprise team collaboration software market is booming in China, and is one that Alibaba and its affiliate Ant Financial have been expanding in. Rival Tencent is also doing so through WeChat’s enterprise version, WeChat Work. Bytedance joined the race in April when it launched its own enterprise messaging and productivity tool, Lark, also known as Feishu.

• When Yuque was first introduced in December, a company spokesperson told TechNode that the tool was open to charity organizations, startups, and public educational institutions free of charge.

Alibaba’s Hema grocery store unit is in talks with more than 30 restaurant chains in China to temporarily hire their employees to help meet surging demand for deliveries.

Why it matters: The current novel coronavirus outbreak is spurring staffing shortages in China’s food delivery industry as demand climbs from residents sequestered indoors. Meanwhile, employees at many restaurant chains sit idle.

• Business interruption caused by the coronavirus outbreak has had an especially devastating impact on offline businesses and small- to medium-sized enterprises (SMEs).
• Cooperation helps eliminate inefficiencies typical to normal workforce fluctuations.

Chinese tech firms ramp up support to battle outbreak

Details: Hema is hiring nearly 2,000 employees from more than 30 restaurant chains including Mystic South Yunnan Ethnic Cuisine and Youth Restaurant, Xibei Restaurant, South Memory, and Shudaxia Hotpot.

• The cooperation will be applicable to employees in major cities like Beijing, Shanghai, Hangzhou, Nanjing, Xi’an, Shenzhen, Guangzhou and Kunming.
• Hema will interview and train the potential new hires, and have them go through medical checkups.
• The new temporary staff will work from Hema’s stores across the country for in-store jobs such as product packing, sorting, food preparation, and others. In-store jobs require less complicated training than delivery roles, Hu Qiugen, Hema’s managing director, told Chinese media.
• There were 170 self-operated Hema stores in China as of Sept. 30, primarily in top-tier cities.
• Human labor is a major cost for restaurant chains. For example, Xibei Restaurant chain operates more than 400 branches in 60 cities. Jia Guolong, its founder, told local media that nearly all of its restaurants have halted operations except for 100 locations that offer delivery services. The company’s workforce of more than 20,000 costs around RMB 150 million ($21 million) per month to employ. If the impact from the coronavirus epidemic continues, the company’s cash will only last three months, he added.

Context: Alibaba and other large Chinese tech firms been boosting their social responsibility efforts as they look to expand globally. Many of the measures are aimed toward supporting SMEs.

• Meituan plans to offer no less than RMB 10 billion in low-interest loans to small- to mid-sized lifestyle merchants.
• Separately, Ant Financial’s online commercial lender Mybank reduced interest rates for business loans by 10% for 1.8 million small business owners in Hubei province, where the outbreak was first reported and widely considered its epicenter.

Major Chinese mutual aid platforms are extending coverage in response to the outbreak of coronavirus that has turned into a pandemic.

Why it matters: Many companies in China have taken action to support those affected by the outbreak which originated in Wuhan. It has so infected over 17,000 people and taken more than 360 lives in China. Mutual aid plans are often thought to provide an added layer of protection.

Details: Chinese mutual aid platforms including Tencent-backed Waterdrop Inc., Ant Financial’s Xianghubao, and Qihoo 360’s 360 Huzhu have all extended their coverage to include coronavirus.

Waterdrop Inc. announced on Saturday that it would temporarily include coronavirus in its coverage. A single payout could go up to RMB 60,000 (around $8,500).

• Ant Financial also made a similar move, allowing members enrolled in the critical illness program to apply for a special aid of up to RMB 100,000. The treatment costs will not be shared among members, the company said it will shoulder the medical costs that go out to those affected by the outbreak.
• 360 Huzhu also extended coverage of its health plans and the payout for medical treatment expenses could go up to RMB 60,000.

Context: Over the past month, China has been trying to control the spread of the deadly coronavirus outbreak.

• On Jan. 21, China’s National Healthcare Security Administration said all medicines and medical services needed to treat coronavirus will be covered by medical insurance.
• Mutual aid platforms started gaining traction in China in 2018, especially among those who have typically been underserved by the country’s healthcare system. These platforms enable members to share treatment costs and are often more accessible and affordable option than traditional health insurance products.
• According to the latest figures from the companies, Xianghubao has accumulated 104 million members in China. Waterdrop Inc. has around 80 million members and 360 Huzhu over 2 million users.

China’s largest technology companies are contributing to efforts to battle the deadly coronavirus which has immobilized the country, donating millions in the form of cash, relief supplies, logistical support, and medical research.

Why it matters: Corporate social responsibility (CSR) is a relatively recent concept in China, where the country’s corporate law first included mention of social responsibility in 2006. As Chinese tech giants like Alibaba, Tencent, and Baidu look to compete globally, they are embracing social and environmental practices in alignment with international CSR standards.

Chinese tech firms brace for impact from coronavirus

Details: As of Feb. 1, nearly 150 Chinese tech firms have donated a combined total of more than RMB 4 billion ($570 million) for efforts to treat those affected by the outbreak, according to Chinese media reports. The funds were raised in addition to other forms of support from medical goods to telecommunications and logistics.

• Alibaba established an RMB 1 billion public health fund to purchase medical products and ensure hospital food supplies. Baidu and Tencent set up RMB 300 million funds each, while Meituan and Bytedance offered RMB 200 million each in aid.
• Alibaba-backed Cainiao Logistics announced on Sunday that it will provide free logistical support to relief materials delivered from more than 38 countries and regions.
• Starting Feb. 2, Ant Financial’s online commercial lender Mybank reduced interest rates for business loans by 10% for 1.8 million small business owners in Hubei, where the outbreak was first reported, including 1.5 million mom-and-pop-type store owners and 300,000 medical supply dealers.
• As of Jan. 28, JD Logistics had transported nearly 70 tons of medical supplies from cities including Shanghai and Guangzhou to Wuhan via rail.
• Pinduoduo, which set up a RMB 100 million fund on Jan. 29, shipped on Jan. 31 100 tons of fruits and vegetables to Wuhan hospitals.
• Bytedance has offered for all the features on its enterprise messaging and productivity app Lark for free to support efforts to work remotely.

Context: The current novel coronavirus has infected 14,557 people as of Feb. 2 , according to the World Health Organization. Infections have been identified in more than 20 countries.

• The catastrophic Sichuan earthquake of 2008, which claimed 70,000 lives, appeared to be a turning point for Chinese CSR efforts. Donation to the victims of the earthquake reached an unprecedented $1.5 billion.
• A growing number of Chinese tech billionaires are doubling their philanthropic efforts, similar to their western counterparts such as Bill Gates and Mark Zuckerberg, the Facebook founder who committed 99% of his company shares to charity initiatives.
• Alibaba’s Jack Ma pledged RMB 100 million to “support the development of a coronavirus vaccine.” Pony Ma, the founder and CEO of Tencent, donated 100 million of Tencent’s shares to the firm’s charity foundation in 2016.

Global adoption of Chinese mobile payment services is on the rise as merchants look to attract Chinese tourist spending, according to a new survey released Tuesday by market research firm Nielsen along with Alibaba’s fintech arm Ant Financial.

Why it matters: Chinese mobile payment giants including Alipay and WeChat Pay have been eager to cash in on the spending power of Chinese tourists traveling abroad.

• As its expansion in the US hits road bumps amid escalated trade tensions, Ant Financial has set its eyes on Europe and other markets like Southeast Asia.
• Ant Financial says it has more than 1.2 billion users worldwide.

Details: Overseas merchant adoption of Chinese mobile payment services rose significantly in 2019, driving a pickup in spending volume for Chinese outbound tourists, according to the report.

• The study surveyed a total of 4,837 Chinese tourists and 547 overseas merchants.
• Adoption of Chinese mobile payment solutions by overseas merchants accelerated during the year, especially in Europe. For example, 61% of the merchants surveyed in the UK said they adopted Chinese mobile payment solutions beginning in 2019.
• Overseas merchants surveyed said they were motivated to provide more Chinese-friendly payment services as 89% of Chinese tourists said they are more willing to spend when provided with familiar payment methods.
• Correspondingly, Chinese tourists’ use of cash has dropped. For example, the amount of foreign currency exchanged by Chinese tourists prior to leaving for Europe fell 16% in 2019.
• Chinese tourists from lower-tier cities are an increasing segment of travelers abroad, and their level of spending overseas compared with tier-one dwellers is narrowing, the report said.
• Singapore, South Korea, Japan, Australia, France, Thailand, New Zealand, Canada, the UK, and the US were the top 10 most popular countries for Chinese tourists using mobile payments in 2019. The ranking was determined by the percentage of Chinese tourists that used mobile payments in a specific country during their most recent trip.

Context: Ant Financial’s payment app Alipay invests in and forms partnerships with local companies in order to gain a foothold in overseas markets.

• In June, Ant Financial inked partnerships with five European e-wallet providers, which allows it to tap into merchants in 10 countries in the region including Finland, Norway, Spain, Portugal, and Austria.

IPO fever has gripped China’s tech space in recent times as rumors swirl that some of the biggest names are eying listings on the Hong Kong bourse. This week, it was the turn of Alibaba’s fintech affiliate Ant Financial.

Ant Financial was quick to distance itself from concrete plans for a dual-listing plan, while previous subjects have done similar.

Local media reported on Saturday that Ant Financial harbored ambitions of floating shares in Hong Kong, beating a slew of US-listed Chinese tech firms to the punch. On Tuesday, further reports surfaced that the $150 billion Alipay operator was not only looking at a listing but also a mulling a dual-listing of both A and H-shares. A-shares refer to those listed on China mainland bourses in Shanghai and Shenzhen, while H-shares are those listed in the southern special administrative region.

Investment banks China International Capital Corp. and Credit Suisse had been working with Ant Financial on IPO preparation for some time, according to the reports. The Hangzhou-based fintech firm took to Weibo to promptly reiterate that the firm doesn’t a plan nor timetable for an IPO, with market watchers left speculating.

“They are being equivocal with their words,” Esme Pau, an analyst at China Tonghai Securities, told TechNode. “The company said there would not be a dual-listing of A and H-shares at the same time, but did not say outright that they will not list in A- OR H-shares,” he said.

Despite the denial, some see an Ant Financial IPO as an inevitability. “Ant Financial has been entertaining the label of ‘world’s most valuable unicorn’ for quite some time now,“ said Alex Sirakov, senior associate at fintech research firm Kapronasia. “Although there is no confirmation for an IPO, in my opinion, it is natural to expect one soon,” he added.

A long time coming

Talk of an Ant Financial IPO is nothing new. The buzz around a possible listing dates back to  2016 when the company hit a valuation of $60 billion. Political uncertainties reportedly led to a rethink. Reports of a Hong Kong dual-listing in April 2018 again ramped up the speculation. 

Ant Financial raised around $14 billion in a Series C round in June that year, said to be the biggest-ever single fundraising deal completed by a private company at that time.

Internal changes at Ant Financial may have fueled the most recent rumor. Alibaba gained approval last September to retake one-third equity of Ant Financial via newly issued shares, thereby concluding five years of corporate restructuring.

At the time, international media stated that the move “paves the way” for Ant Financial to go public. The move coincided with an executive reshuffle, further fueling the speculation.

“Recent changes in the capital structure and the management echelon of the firm may hint about that, along with the overall trend of various political and economic incentives in China to incite the growth and maturity of China capital markets,” Sirakov said. “This, paired with the organic need that Ant Financial needs to further validate positions beyond its home turf, may justify a decision to go public sooner and move to the next level of corporate development,” he added.

Ant Financial has been aggressively expanding into Southeast Asia and Europe. Listing in Hong Kong, rather than China’s mainland, could help with the expansions.

“Mainland markets entertain liquidity, but predominantly in RMB, which can be an issue when a company intends to use the IPO proceeds for international expansion,” said Sirakov. China’s exchanges are also more susceptible to volatility. By contrast, Hong Kong is a sophisticated and mature market and, therefore, a natural choice for Asian blue chips. 

Other factors include the US-China trade war. However, Beijing has looked to boost the quality of capital markets within its domain, Sirakov added.

Tech firms look south

Recent demonstrations have hit Hong Kong’s capital market hard, but the tide seems to be turning.

US-listed Chinese firms like Trip.com Group and NetEase reportedly held initial talks at the start of the month with the Hong Kong bourse over secondary listings. Additionally, Baidu has allegedly completed an internal assessment for a secondary floatation in the special administrative region, according to another report posted days later. 

The push for blue-chip dual-listings comes as Washington is heightening scrutiny of Chinese companies. Alibaba’s $13 billion secondary listing in Hong Kong in November also boosted confidence.

“There are a lot of tech companies hoping to list in Hong Kong,” Tonghai Securities’ Pau added. “For one, the market sentiment is more upbeat than before. Second, the level of uncertainty caused by the trade war will increase with time.”

The trade war has extended to capital markets. President Trump was reportedly considering delisting Chinese companies from US markets in September.

“My view on a second listing is it’s a smart move given the talk last year about banning Chinese companies from US capital markets, regardless of the practicality of a ban like that,” James Hull, an analyst and portfolio manager at Hullx Capital, told TechNode.

While Chinese tech firms are keeping a tight lid on any listing plans, market watchers believe going public is the logical step considering the current climate. For Ant Financial, the upside of a Hong Kong IPO is the comparatively mature market state, while listings also face less scrutiny compared with those stateside. For US-listed tech companies seeking a secondary listing, Hong Kong could help them hedge risks amid the ongoing trade tensions.

Editor’s note: This article has been updated to reflect that Ant Financial has never confirmed or denied dual listing but stated that the firm doesn’t have a plan or timetable for an IPO at present.

Shanghai has set its sights on becoming a globally competitive fintech hub in five years, according to a new action plan released by the municipal financial regulator on Wednesday, including initiatives to ramp up research and development of technologies like blockchain and 5G.

Why it matters: In a bid to compete with global financial centers such as New York and London, China has been promoting the development of fintech applications like mobile payments, internet financial services, and a digital fiat currency in Shanghai and other major cities.

• In October, the country’s central bank introduced a series of new measures to promote fintech development in Shanghai and the surrounding Yangtze River Delta region.

Details: Shanghai Municipal Financial Regulatory Bureau announced an action plan on Wednesday to become an international financial tech hub in five years.

• The five-year plan laid out 25 major tasks covering five key areas including ramping up research, pushing for regulatory schemes and subsidies, and introducing preferential financial and tax policies to attract financial services and tech companies.
• One of the five key tasks is to promote Shanghai as a global hub for financial technology, for which the government is partnering Chinese tech giants like Ant Financial and Alibaba.
• The Shanghai government also pledged to foster 20 fintech startups in the next five years and incubate 50 fintech projects.

Context: Shanghai has long been regarded as the financial hub of China and is home to fintech unicorns including Ping An-backed online lender Lufax and peer-to-peer platform Dianrong.

• A recent survey on global financial centers named Shanghai and Beijing at the top of a the list of cities ranked best for fostering a fintech industry in a study of global financial centers, Four of the top five are in China.

China’s central bank has said it will launch the second iteration of its personal credit system on Jan. 20, closing loopholes in the earlier version which allowed users to whitewash credit records with fake divorces or account closures.

Why it matters: The revision improves upon some of the major flaws in the first version including long lag times and gaping loopholes, but poses little threat to online loan providers and their lending ecosystems, which remain far more convenient and user friendly.

Details: There were 2.1 billion queries into personal credit ratings and 97.72 million into corporate credit ratings from January to November 2019, according to a report from state-owned Beijing News.

• Wang Xiaolei, deputy director of the Credit Reference Center (CRC) said that the system will collect data on personal credit information, public utilities payments, and public information including court-administered punishments.
• The new system is speedier than the previous version which could take up to a month to process updates, providing opportunities for people to take advantage of the lags to apply for loans.
• The new version of personal credit information expands coverage to include loans taken out by married couples. If a secondary borrower buys a house again following a divorce, preferential policies for first-time buyers no longer apply.
• Loan paybacks from closed credit cards will be visible for five years rather than two, but this widening of data collection are a cause of concern for some analysts.
• He Nanye, researcher at Suning Finance Research Institute told Beijing News that more is not better, and that the expansion of irrelevant credit information will waste social resources and weaken the accuracy of the credit system. For instance, casting a net too widely could flag legitimate small business owners who have accrued debt.

Context: China’s central bank is carrying out a balancing act between preventing risk and nurturing small enterprises. Both are central government priorities.

• CRC is the world’s largest credit information agency and provides standardized credit files for every single person or company in China engaged in credit-related activities.
• Online lenders have thrived in the gap created by the cumbersome central bank system, which deters users. As online lending has risen in popularity in recent years, the platforms have released their own credit ratings.
• Credit ratings from online lenders diverge from the central bank’s credit system because these platforms prioritize attracting users and enticing them to spend on other platforms.
• “Commercial credit ratings from lending apps like Ant Financial’s Huabei and Jiebei are not the same as the central bank’s,” Dong Tian, an employee at financial investment app Haomaijijin told TechNode. “Ultimately the customer is god. If you don’t pay back a loan on time, they won’t submit this to the central bank’s credit system unless you agree.”

Ant Financial-backed bicycle rental platform Hello Global has said that it is the largest two-wheel transportation app in China with more than 300 million registered users, according to its 2019 annual report released on Monday.

Why it matters: As China’s bike rental boom cools, the relative latecomer to the sector has outrun rivals Mobike and Ofo thanks to its focus on lower-tier cities, business expansion beyond bike rentals, and backing from Alibaba’s fintech arm, Ant Financial.

• Hello Global ranked first in June 2019 with 21.9 million monthly active users (MAU) on its app and 41.6 million MAU on the Alipay mini program, according to figures from data intelligence platform Quest Mobile. Mobike followed with 13.18 million MAU on app and 35.80 million on Alipay mini program during the same period.
• China’s top bike rental firms including Hello Global and Mobike are raising bike rental rates in an effort to shift to sustainable business models.

Details: The company operates its bike rental business in 360 domestic cities while its electric bike rental service is available in 260 cities across the country. Hello Global’s carpooling service, which launched in January 2019, operates in more than 300 Chinese cities.

• Around 70% of the platform’s use base is comprised of the internet-savvy segment born post-1980 and post-1990, though users in other age groups are rising, according to the report. The proportion of users born post-1960 and post-1970 rose to more than 20%, while the post-2000 user segment nears 10%.
• The company said it has registered a total of 475 patents as of 2019, of which more than 170 are patents for inventions and more than 130 are patents for applications.
• The firm has created more than 30,000 operation and maintenance positions since its launch, and 15% of this employee segment are between 40 to 50 years old.
• Also known as Hello Bike and Hello Transtech, the company began using the Hello Global name in 2019 as it expands across the mobility industry, a company spokesman told TechNode.

Context: Launched in 2016, two years after Mobike and Ofo, Hello Global gained traction quickly as the first bike-sharing operator to focus its business within China’s smaller cities.

• Hello Global, then Hello Bike, merged with Shanghai-listed competitor Youon Bike in October 2017.
• Ant Financial has participated in four of the company’s seven funding rounds, which have raised a combined total of $1.8 billion.
• China’s bike rental market was worth RMB 10.8 billion (around $155 million) in 2018, up 73% year on year driven by growth in lower-tier cities and standardization of bike rental services, according to data from research institute Analysys. Sector growth is expected to fall to 33% year on year with market size hitting RMB 14.4 billion in 2019, according to the report.

China’s largest mobile payment app Alipay released annual spending figures for individual users on Monday morning, spurring discussion among netizens on microblogging platform Weibo and boosting it to the top trending topic before noon.

Why it matters: The topic went viral in a matter of hours, underscoring how important mobile payments have become to China’s netizens.

• China’s mobile payment transactions reached RMB 166.1 trillion ($23.8 trillion) in the first half of 2019, according to iiMedia Research.

Details: Chinese netizens were not shy about sharing how much they spent last year. The annual account statement reveals detailed numbers such as how much and how many times a user spent in categories like lifestyle, dining, clothes, and transportation.

• Many Chinese netizens seemed shocked to see last year’s spending, some expressed doubt about the accuracy of Alipay’s numbers. “How is it possible I spent so much?” was a common reaction to the figures.
• Many users questioned the accuracy of Alipay’s numbers. “I don’t think it is accurate at all. I spent RMB 110,000 last year? I don’t have that much in my bank and I’m not in debt,” a user going by the handle “Suibi Qingmo kingo” commented under a post by iFeng media.  “I think the numbers are fake. I’m a poor college student. It shows I spent RMB 40,000 last year, I don’t believe it. My annual household income is not even that much,” another Weibo user responded.
• Some Weibo users speculated that Alipay’s annual statements take into account transfers between the user’s bank accounts and purchases of products that have been returned. Others pointed out the common practice of one person in a group paying with Alipay first, then settle the bill with the rest of the group on WeChat.
• Ant Financial responded in a Chinese media report that this year’s annual statement includes total expenditures. Several new categories had been added to the total including investments and wealth management, finance and insurance, red packets sent between users, charity donations, transfers to other accounts, and pre-paid account top-up.
• Content containing the hashtag #AlipayAnnualAccountStatement (our translation) had been read more than 480 million times as of Monday afternoon.

Context: Alipay has more than 1.2 billion users globally as of the end of June, and has looking to expand in a number of different markets.

• Rival WeChat Pay also generates annual account statements for individual users that list of transactions to help give users visibility on spending habits.

Alibaba’s fintech arm Ant Financial and TikTok operator Bytedance are joining the increasingly heated race to set up digital banking operations in Singapore.

Why it matters: The Lion City has become a top destination for Chinese companies looking to set up digital banking operations as plans in Hong Kong stall due to ongoing protests.

• Ant Financial and Bytedance are joining local contenders including gaming company Razer and ride-hailing platform Grab, which have all submitted applications for full banking licenses in the same week.

Details: Ant Financial confirmed on Thursday to Bloomberg that it applied for a wholesale license. Singaporean media The Business Times reported on Friday that Bytedance also has applied for the same license.

• Monetary Authority of Singapore (MAS) announced in June that it would issue up to two digital full bank (DFB) licenses and three digital wholesale bank (DWB) licenses.
• Digital wholesale banks will be allowed to take deposits from and provide banking services to small- and medium-sized companies and other non-retail customers, MAS said. Digital full banks, which will be allowed to provide services to retail and non-retail customers, must be controlled by Singaporeans and headquartered in the city-state.
• The banking regulator is expected to announce in mid-2020 which applicants will be rewarded the licenses. The licensed digital banks are expected to start their operating as early as the mid-2021.
• Bytedance declined to comment when contacted by TechNode on Friday.

Context: Ant Financial is regarded as one of the frontrunners in the digital banking race in the region, and obtained a license from the Hong Kong banking regulator in 2019. Ant Financial has been deepening its roots in the fintech and mobile payments markets in Southeast Asia, where Alibaba has established its e-commerce presence.

• Bytedance has been eyeing China’s digital payments market since 2018, but appears to have made little progress. Aside from its consumer lending app “Manfen” launched in October, Bytedance also offers a micro-lending service through Jinri Toutiao’s “Fangxinjie” feature.
• Bytedance is considering Singapore as the home for its global headquarters outside of China.

Update and correction: added detail about Bytedance’s consumer finance offerings, corrected the Manfen launch to October. An earlier version said it had launched in November.

California-based online payment company Paypal has completed the deal to acquire 70% of Chinese digital payment service provider Gopay, a move that allows the US company to operate payment services in the country.

Why it matters: By taking on majority ownership of Gopay, Paypal is a step closer to becoming the first foreign company to provide digital payment services in China, which for many years foreign companies like MasterCard and Visa have been trying to do.

Details: Paypal acquired the stake in Gopay through its Shanghai-based subsidiary Yinbaobao Information Technology. The People’s Bank of China, the country’s central bank, approved the deal in late September. The companies did not disclose details including the deal size.

• Gopay is a relatively small player in China’s payment space, which is dominated by Alipay and WeChat Pay. However, with the partnership, Paypal gains access to the firm’s license to provide online, mobile, and cross-border renminbi payments, something it has been working on for years.

Context: With policies favoring domestic players, foreign firms have encountered major hurdles when attempting to enter China.

• China has been more friendly to foreign companies wanting to apply for licenses since 2017, but the approval process has been slow. The China-US trade war has also made the process more complicated.
• Gopay, also known as Guofubao in China, was founded in 2011 as a joint venture between the China International Electronic Commerce Center (CIECC), affiliated with the Ministry of Commerce, and HNA Retailing Holding, but is now jointly held by the CIECC and a subsidiary, Cofortune Information Technology Co., according to its website.

Ant Financial, a fintech affiliate of Chinese e-commerce giant Alibaba, has acquired a significant stake in Vietnamese digital payment firm eMonkey in a deal negotiated during the summer, Reuters reported on Thursday.

Why it matters: The Chinese fintech unicorn is strengthening efforts to capture more global opportunities.

• Earlier this week, the company announced several leadership changes, including naming Simon Hu as the company’s new chief executive, replacing Eric Jing.
• Jing, who currently serves as the executive chairman of the company, said in the announcement that he needed to focus more of his time to the company’s “future market potential” and “globalization strategy.”

Details: Ant Financial will not have majority control over eMonkey but is still expected to have significant influence and provide technical expertise to the e-wallet, according to Reuters.

• The deal, negotiated over the summer, is reportedly not being announced publicly in Vietnam because it could lead to pushback. Anti-China sentiment has been brewing in Vietnam since last year, sparked by fears that new government policies would allow Chinese investors to dominate special economic zones.
• Ant Financial’s investment is said to be a savvy move because eMonkey has already obtained all of its operating licenses from the State Bank of Vietnam.
• Vietnam presents significant growth opportunities with a market of nearly 100 million potential users, a quarter of which are under 25, according to the report.
• An Ant Financial spokesman declined to comment on “market rumors” on Friday.
• The sources declined to provide details about the size of the deal.

Ant Financial ramps up investment in SEA with $1 billion fund

Context: Ant Financial is the dominant mobile payment provider in China and has been seeking expansion into other emerging markets, specifically those in Southeast Asia.

• The company has set up a $1 billion new fund to invest in startups in the region.
• Ant Financial’s mobile payment app Alipay held a little over half of the Chinese market in the third quarter, according to Chinese research firm Analysys.

Chinese fintech company Ant Financial and US-based asset management firm Vanguard will begin providing investment consultancy services to individual investors in China.

Why it matters: Vanguard, one of the largest public mutual fund providers in the world, is one of the many foreign asset management firms that hope to gain inroads in China. The partnership with Ant Financial is said to pave the way for Vanguard to acquire a license allowing full control of its ventures in China.

• Vanguard, BlackRock, and four other overseas financial institutions have expressed their intention to apply for fully foreign-owned mutual fund licenses in China, according to Bloomberg. The country’s securities regulator said in October that overseas institutions can apply for total control of onshore ventures starting next year.

“Today, millions of Chinese investors lack access to professional investment advisory services. Through this partnership, we will reduce complexity and significantly lower the threshold for individual investors to access high-quality wealth management advice in China,”

—Peter Zhang, CEO of the joint venture

Details: The two companies will advise Chinese investors on fund investment, a service for which it has obtained approval from the China Securities Regulatory Commission, through a joint venture.

• According to Vanguard, the JV will provide customized services for investors based on risk preference, time frame, and investment objectives. The service will be accessible through its mobile payment app Alipay and its wealth management platform Ant Fortune and will accept minimum investments of RMB 800 (around $113).
• Ant Financial told TechNode on Monday that the official date of service launch will be revealed “soon.”

Briefing: Ant Financial, Vanguard form joint venture in Shanghai

Context: Alibaba’s fintech affiliate Ant Financial set up a joint venture with the Shanghai unit of Vanguard in June, government records showed.

• Vanguard opened its Shanghai office in 2017. It claims to have $5.9 trillion worth of assets under management, as of the end-October.
• Ant Financial’s Alipay boasts a global user base upwards of 1.2 billion, and operates the world’s largest money market fund, Tianhong Yu’e Bao.

Chinese fintech company Ant Financial has launched enterprise collaboration software, Yuque, as it celebrates Alipay’s 15th anniversary.

Why it matters: The move aligns with Alibaba’s overall strategic shift to enterprise-facing services.

• Alibaba and companies within its ecosystem have been expanding enterprise-facing technologies such as messaging and productivity tools, as well as blockchain and cloud services.
• Enterprise software has increasingly been attracting Chinese tech giants including Alibaba, Tencent, and Bytedance.

Details: Yuque, which translates roughly into “Communication Sparrow,” is a professional cloud-based platform for file sharing, editing, and organization.

• The platform had been incubated within Ant Financial starting in 2015. The company said the tool has already been used by 100,000 employees at Alibaba, and is now available to other enterprises and organizations.
• Yuque was first developed as a Confluence-like collaboration tool for internal use, an Alipay spokesperson told TechNode. The platform allows users to edit and share content in common file formats such as Microsoft Word documents and PDF, and supports markup languages including HTML and Markdown.
• According to its website, the service costs RMB 5,999 (around $850) per year for a virtual workspace, which has a default capacity of 500 users but can be expanded as needed.
• Currently, only the PC version is available. Users can access Yuque via Alibaba’s workplace tool DingTalk as a third party application. Users can also log in with their existing DingTalk account, as well as their logins for Alipay, WeChat, and Alibaba’s productivity app Teambition.
• The company has decided to open up the tool to charity organizations, startups, and public educational institutions free of charge, the spokesperson said.

Context: Alibaba and its affiliated companies have been expanding their enterprise-facing tech offerings.

• The e-commerce company launched productivity software DingTalk in 2016. Around the same time, rival Tencent’s messaging app WeChat launched an enterprise version, WeChat Work. Alibaba acquired the Chinese Trello-like productivity tool Teambition in March 2019 to expand its presence in the space.
• Bytedance officially launched its own enterprise messaging and productivity tool, Lark, in April, aiming to compete with Alibaba’s DingTalk.

INSIGHTS | China’s shift to enterprise: a quiet evolution

Chinese fintech giant Alipay is partnering with London-listed payments and foreign exchange firm for cross-border remittance services and blockchain applications, the duo announced on Wednesday.

Why it matters: The move, which is expected to expand the reach of remittance services for both companies, is not the first Ant Financial has made in the UK this year.

• Ant Financial acquired London-based payments firm Worldfirst after its acquisition of US money transfer company MoneyGram last year fell through over US national security concerns.
• The partnership provides a boost to Ant Financial’s existing blockchain capability.

“We are excited to partner with Finablr for global remittances, as we continue to explore new ways to apply our technology in order to benefit more people around the world… For example, using blockchain technology developed by Alipay, we have helped launch a blockchain remittance service between our e-wallet partners AlipayHK and GCash, providing round-the-clock, real-time transfers between Hong Kong and the Philippines.”

—Clara Shi, head of Alipay’s global remittances business

Details: The latest partnership aims to extend the scope of collaboration to Ant Financial’s remittance network partners in China and other countries, Finablr said.

• The first stage of the partnership, which includes the integration of the Finablr platform with Ant Financial’s remittance system, has been completed.
• The two companies will also explore other areas of collaboration, including digital gifting as well as driving efficiencies through Ant Financial’s Ant Blockchain Information System.
• Finablr said it is “one of the first global cross-border remittance partners” for Alipay.

Context: Both Ant Financial and Finablr have adopted blockchain technology for real-time cross-border money transfers.

• Ant Financial will benefit from Finablr’s blockchain-based money transfer capabilities. Finablr’s remittance payment system is powered by RippleNet developed by US-based payment service Ripple, the firm behind top cryptocurrency XRP.
• Blockchain-based money transfers are faster and more secure.
• In October last year, Travelex and Swych, two brands under Finablr, launched a cross-border shopping solution for Alipay’s largest rival WeChat Pay.
• Alipay is said to serve more than 1.2 billion people globally. The payment firm has been expanding its cross-border services for Chinese travelers abroad as well as overseas customers shopping on Chinese sites. It now supports 27 currencies.

A consortium of Chinese technology companies has banded together to establish standards for developing facial recognition technology, as concerns grow with the technology’s increased ubiquity.

Why it matters: Facial recognition has become part of everyday life in China, with applications in sectors as far-ranging as public security to retail.

• Nevertheless, its use has sparked heated debate, with some arguing that the technology is being applied to scenarios for which it is unneeded.
• Earlier this month, a university professor from China’s eastern Zheijiang province filed a lawsuit against a wildlife park over being forced to use its facial recognition system to access the facility.

Details: The working group was established on Nov. 20 and is made up of companies including social media and gaming giant Tencent, Alibaba-affiliate Ant Financial, smartphone maker Xiaomi, voice recognition firm iFlytek, and surveillance equipment manufacturer Dahua Technology, among others.

• The group is led by Sensetime, the world’s most valuable artificial intelligence (AI) firm. The US placed the company on a trade blacklist last month over alleged complicity in human rights violations in China.
• The consortium’s aims are to standardize the research and development of facial recognition technologies, ensure safety in its use, and promote “healthier” development of the industry, according to a Sensetime statement.
• The group will also lead and participate in setting up international standards, the company said.
• The move comes following concerns over biometric data theft and a lack of accuracy in properly identifying individuals.
• Sensetime said data leaks come as a result of a lack of specifications for collection, storing, and processing facial data.

Context: Despite the convenience that facial recognition technologies bring, the fallout could be disastrous if facial data falls into the wrong hands.

• For example, a password can be changed if it is compromised while physical features cannot be easily modified if facial data is stolen.
• While a vast majority of commercial applications are opt-in, the Chinese government has increased its focus on using the technology in its vast surveillance apparatus.

Alibaba’s fintech-affiliate Ant Financial is looking to raise about $1 billion for its new fund to invest in startups within the region, according to a Bloomberg report on Tuesday.

Why it matters: The fintech unicorn recently ramped up its expansion efforts overseas as growth becomes more challenging in China’s cooling economy.

• The company plans to increase its customer base to 2 billion over the next 10 years and significantly grow its users outside of China. Asia will be an important focus for the company, where it has said there is huge growth potential.

Details: With the new fund, Ant Financial is reportedly looking to invest in startups in emerging markets including Southeast Asia and India, with a focus on payments and internet finance, according to an unnamed source cited by Bloomberg, confirming an earlier DealStreetAsia report.

• Ant Financial Vice President Ji Gang said at a conference in Beijing earlier this week that the company is raising a new fund for startups with higher valuations, but did not disclose the fund size or potential targets.
• Ant Financial did not immediately respond to a TechNode request for comment.

Context: Ant Financial set up its investment unit five years ago and has invested in more than 160 startups, said Ji, with a majority of the deals in the past two years. These investment efforts are strategic and align with expansion efforts for Ant Financial’s payment and financial services businesses, he said.

• Ant Financial has been expanding its footprint in Asia’s emerging markets, including India and Indonesia.
• The company is a major stakeholder in India’s leading payment firm Paytm, in which it poured another investment worth $400 million earlier this month.
• In October, India’s Economic Times reported that Ant Financial may be leading a $600 million funding round for online food delivery app Zomato.
• Ant Financial said earlier this month that it plans to apply for a virtual banking license in Singapore.

Tencent is working with five international card network operators including Visa and Mastercard which will allow WeChat users to link international bank cards to the platform for mobile payments.

Why it matters: China’s largest mobile payment operators WeChat Pay and Alipay are eager to tap into the lucrative opportunities brought by international consumers traveling to the country.

Details: Tencent has been in talks with card-network operators Visa, Mastercard, American Express, and Discover as well as Japan’s JCB to support the ability to bind overseas credit cards to WeChat Pay, according to an article (in Chinese) published on Tencent News on Tuesday.

• WeChat Pay will begin with a pilot program to test purchases using overseas credit cards on railway ticketing platform 12306.cn and Chinese ride-hailing service Didi Chuxing.
• After the pilot program, Tencent will open up the international card support for more usage scenarios which adhere to strict guidelines from regulators and anti-money laundering policies.
• US-based credit card service provider Visa posted a statement (in Chinese) on its WeChat official account in response to Tencent’s announcement, saying the company’s new international card scheme is “exhilarating” news for the entire payment industry.

Context: WeChat Pay already supports more than 300 banks in mainland China and several overseas credit cards from issuers such as JCB, Visa, and Mastercard. However, users without mainland China-issued credit cards are allowed only limited functions such as QR code payment.

• On Tuesday, WeChat Pay’s rival Alipay introduced a foreign card workaround for mobile payments which allows tourists to link foreign bank cards to an online prepaid card service provided by the Bank of Shanghai.

Ant Financial launches international Alipay service for overseas users in China

Chinese fintech giant Ant Financial has introduced an international version of its mobile payment app, Alipay, allowing travelers to link foreign bank cards to the service for use in China.

Why it matters: This marks Ant Financial’s latest move to expand Alipay’s footprint and the first time it has provided a payment service targeting overseas users on the mainland.

• Ant Financial has been eager to expand its user base beyond China’s 800 million-plus internet population. The company has been working with overseas partners to serve Chinese tourists as well as provide localized e-wallet services.

Details: The new feature allows international visitors to use Alipay’s services including QR code payment at restaurants and shops, as well as online purchases.

• To access the international version, users need to download the Alipay app and register with their overseas mobile phone number. Through the “Tour Pass” mini-program, international users can use the prepaid card service provided by the Bank of Shanghai that allows them to use QR code payment and online payment.
• International users can link their debit or credit cards with the prepaid card within the mini program.
• The minimum top-up for each card is RMB 100 and the balance is capped at RMB 2,000 (around $285). The prepaid card is valid for 90 days. The remaining funds will be automatically refunded when the card expires.
• The international version is now available on both iOS and Android devices.

Context: Previously, users were required to have an account with a Chinese bank in order to use Alipay’s services.

• WeChat Pay already supports credit cards issued by foreign service providers for limited services such as making purchases and transferring funds.
• Ant Financial said that its QR code payment service has 1.2 billion users worldwide.

China has surpassed the United States as the country with the most unicorns, with 206 privately held tech startups each valued at $1 billion or more, the Hurun Research Institute said on Monday.

The report identified 494 unicorns worldwide as of June 30, 2019.

Why it matters: China and the US are locked in a race to lead in key technology sectors such as artificial intelligence (AI) and cloud computing. Ongoing trade tensions between the two countries have led to the crippling of several Chinese tech startups by a ban on the import and sale of American technology.

“China and the USA dominate with over 80% of the world’s known unicorns, despite representing only half of the world’s GDP and a quarter of the world’s population.  The rest of the world needs to wake up to creating an environment that allows unicorns to flourish in.”

—Hurun Report Chairman and Chief Researcher Rupert Hoogewerf

Details: According to the ranking, the world’s top three unicorns by valuation are from China: Alibaba-affiliate Ant Financial valued at $150 billion, TikTok’s parent company Bytedance worth $75 billion, and ride-hailing giant Didi Chuxing at $55 billion.

• The report named American venture capital firm Sequoia as the most successful unicorn investor with 92 unicorns in its portfolio. Other prominent unicorn investors include SoftBank, Tencent, Tiger, IDG, Goldman Sachs, and Alibaba.
• The US trailed China by a small margin, clocking 203 unicorns.
• In China, e-commerce has produced the most unicorns with 33 startups in the sector. Fintech and media and entertainment are also fertile breeding grounds for unicorns.
• The cumulative valuation of China’s fintech unicorns totaled $262 billion, more than four times than that of the US.
• Chinese startups SenseTime, valued at $6 billion, and Megvii, valued at $4 billion, were among the four highest valued AI unicorns worldwide.
• This is the first report on global unicorns released by the Hurun Research Institute.

Context: China is eager to transform itself from the world’s manufacturing center into an innovation hub on par with the most technologically advanced countries, and it is looking to do so by boosting its technology sector.

• In July, China debuted a Nasdaq-style STAR Market technology board on the Shanghai Stock Exchange, which aims to make China a more attractive destination for tech startups looking to float shares.
• The Chinese government is pouring money into fostering tech startups. The Ministry of Science and Technology runs several tech-focused incubation programs and funds.

Alibaba’s fintech affiliate Ant Financial is in talks with lenders for a syndicated loan of up to $3.5 billion, Bloomberg reported on Wednesday.

Why it matters: Ant Financial’s latest funding move follows a raft of Chinese tech firms seeking to lower debt costs. Some big borrowers in the region have been taking advantage of abundant liquidity in the loan market amid a slump in deal volume.

Details: Ant Financial is in discussions for $2.5 billion in financing that comes with a $1 billion greenshoe option, according to Bloomberg citing people familiar with the matter. An Ant Financial spokesperson told TechNode that the company does not comment on market rumors.

• The price for the three-year loan in question is less than 100 basis points over the London interbank offered rate known as Libor, or 1%, according to unnamed sources. When completed, the new loan will be used for general corporate purposes.

Alibaba gains 33% of Ant Financial in conclusion of spinoff deal

Context: Ant Financial last took out a syndicated loan in 2017, securing a $3.5 billion three-year loan and paying a margin of 1.35%.

• Last month, smartphone giant Xiaomi was in talks to re-finance a $1 billion loan. The deal followed Tencent’s largest dollar-based loan in August and Alibaba’s increase of an existing loan to $4 billion in May.
• In September, Alibaba took a 33% equity interest in Ant Financial’s newly issued shares. Many saw the move as clearing a path for Ant Financial’s future initial public offering (IPO) plans.

Indian digital payment company Paytm is said to be nearing a deal to secure $2 billion in new funding from investors including Alibaba affiliate Ant Financial and Japanese conglomerate SoftBank Group, according to Bloomberg.

Why it matters: India has become fintech’s fastest-growing market, overtaking China’s. The country’s digital payments market is expected to worth around $1 trillion in 2023. While still nascent compared with China’s $5 trillion industry, international players including Facebook and Google—blocked from China by regulators—are showing interest.

• Ant Financial has been eyeing investment opportunities in Southeast Asia to increase its global footprint and boost revenues.

Details: Talks regarding the deal are reportedly in their final stages but the terms still could change, according to an unnamed source. The new funding could value Paytm at around $16 billion, surpassing that of Southeast Asian tech super unicorns Grab and Gojek.

• Earlier this month, Vijay Shekhar Sharma, founder of Paytm, revealed in an interview the company’s intention to raise new funds. However, Sharma also said that the company will remain private for the next two to three years.

Context: Ant Financial was one of Paytm’s early backers. It has shown interest in continuing to invest in fintech startups in other markets.

• In 2015, Ant Financial invested $680 million in Paytm for a 40% share, becoming its largest shareholder.
• India surpassed China as the top fintech investment recipient in Asia in June, according to a report from CB Insights published in the second quarter. Last year, there was a significant drop-off in fintech deals in China, affecting funding activities in the rest of Asia.
• Earlier this month, Indian news outlets reported that Ant Financial was in talks to lead a $600 million funding round in Zomato, a leading food delivery startup in the country.

China’s big two digital payment platforms Alipay and WeChat Pay have issued separate statements on Thursday making explicit their policies forbidding transactions related to cryptocurrency trading.

Why it matters: The move follows several media reports suggesting that cryptocurrency exchange Binance has started accepting fiat currencies via Ant Financial’s Alipay and Tencent’s WeChat Pay.

• Malta-based Binance, considered one of the largest cryptocurrency exchanges in the world, announced on Wednesday a new peer-to-peer (P2P) trading function that allows Chinese users to trade cryptocurrencies against the Chinese yuan.
• P2P trading circumvents Chinese laws banning cryptocurrency exchanges, allowing traders to instead settle transactions directly with one another.

“To reiterate, Alipay closely monitors over-the-counter transactions to identify irregular behavior and ensure compliance with relevant regulations. If any transactions are identified as being related to bitcoin or other virtual currencies, @Alipay immediately stops the relevant payment services.”

—Alipay on Twitter

Details: Binance announced the new P2P trading function on Wednesday. However, amid the excitement, there was also confusion regarding the incorporation of Alipay and WeChat Pay as payment methods.

• On Wednesday, Binance founder and CEO Zhao Changpeng, known as CZ, confirmed that investors in China can now purchase cryptocurrencies like Bitcoin using popular payment methods like Alipay and WeChat Pay via Binance. Later, CZ clarified that while users can use Alipay and WeChat Pay in P2P transactions for payment, Binance is not working directly with the two providers.
• Alipay issued a statement on multiple social media platforms in Chinese and English to reiterate its anti-crypto stance on Thursday.
• Shortly after, WeChat Pay also put out a similar notice (in Chinese) to clarify that transactions related to cryptocurrencies will be stopped immediately, adding that users are welcome to report offenses and suspicious activities.

Context: The P2P trading feature is Binance’s attempt to re-enter China, its home market, where cryptocurrency exchanges are illegal. The response from China’s largest mobile payment platforms conforms with Chinese laws banning cryptocurrency trading. This is not the first time WeChat and Alipay have gone after cryptocurrency and exchange services.

• Earlier this year, WeChat Pay and Alipay reportedly requested cryptocurrency exchange Huobi to remove their payment methods from its over-the-counter trading desk.
• In May, WeChat updated its payment policy, restricting merchants from participating in illegal transaction activities including crypto trading and token fundraising.
• According to CZ, the Chinese market is the first market to see this P2P trading service. The company expects to roll it out in other regions soon.
• The company was among the many exchange services ousted by China in 2017 amid a crackdown on crypto assets.

Despite the cooling economy, Chinese consumers aren’t holding back when it comes to holiday shopping. Domestic third-party payment platforms reported robust growth in transaction number and value during China’s week-long National Day holiday.

Why it matters: China’s economy has been growing at the slowest pace in nearly 30 years amid ongoing trade war with the US. The surge in consumer spending provided a much-needed boost to the economy.

• In the lead up to the Golden Week holiday which runs from October 1 to 7, the Chinese government unveiled several measures to spur domestic consumption.

Details: China’s major third-party payment platforms recorded a surge in transactions during the National Day holiday.

• China’s centralized online payment clearinghouse NetsUnion Clearing Corporation reported that the number of daily transactions increased nearly 80% year on year during the holiday, while daily transaction value increased 163% from the previous year, according to state-owned media outlet Xinhua. NetsUnion processed RMB 4.33 trillion ($607.2 billion) in 8.594 billion transactions over the holiday.
• Ant Financial said that average total spend per user grew 15% to around RMB 2,500 over the holiday. Overseas transactions on Alipay app rose compared with the same period last year, with Europe and Southeast Asia seeing the fastest growth. Japan and Thailand were the top destinations for Chinese tourists by transaction volume.
• WeChat Pay reported a similar trend, naming Japan as the top destination for Chinese tourists. The number of transactions (in Chinese) processed on a single day by merchants including grocery and fresh produce sellers, restaurants, cab drivers, and convenience stores rose as much as 30% during the holiday period.

Context: China has been planning efforts to boost consumption.

• In August, the government announced a plan to boost disposable income this year and the next with the aim to spur consumption. It also said previously that it would roll out other measures such as extending retail hours.
• According to China’s Ministry of Commerce, the revenue from retail and dining during this year’s holiday rose 8.5% from a year earlier to RMB 1.52 trillion, decelerating from the 9.5% seen in the same period in 2018.

Alibaba affiliate Ant Financial is expanding its collaboration with open-source blockchain project Hyperledger to develop cross-blockchain technologies, it said Thursday at the Alibaba Cloud’s Apsara Conference in Hangzhou.

Why it matters: The Alibaba fintech affiliate sees blockchain as an important technology supporting its future product and services. The company has been plotting its way to commercializing blockchain technology in recent years.

“Today, with the advancement of technology, blockchain is capable of helping us build a brand new trust mechanism based on cryptographic algorithms. So, going from a platform based on trust to a trust system based on big data to cryptography-based trust is the reason why we see blockchain as a core technology for Ant Financial in the future.”

—Li Jieli, senior director of innovative tech department at Ant Financial

Details: Ant Financial announced today an extension of its partnership with Linux Foundation’s Hyperledger to develop cross-blockchain technologies.

• Ant Financial said it will continue to work with Hyperledger to explore how to connect and integrate different blockchain technologies and ecosystems. Specifically, the two will collaborate with other blockchain companies to develop processes and rules for cross-blockchain technologies.
• On Wednesday, Ant Financial signed a Letter of Intent with the agrochemical division of Bayer AG. The two companies will collaborate to create blockchain-based solutions designed to bring greater transparency to improve food safety and the efficiency of agricultural supply chains.
• Geoff Jiang, vice president and general manager of Ant Financial’s Intelligent Technology Group, said at the conference that the company’s blockchain platform has achieved the capacity to support 1 billion accounts and a daily transaction volume of 1 billion.

Context: The fintech giant launched in February its blockchain subsidiary Ant Blockchain, which focuses on software development, big data, infotech, and technical consulting. The company also has another blockchain subsidiary focusing on fintech research and development and supply chain management.

• In 2018, Alibaba and Ant Financial jointly held the top in a global blockchain patent ranking with 90 patent applications.

Chinese e-commerce giant Alibaba has received a 33% equity interest in its fintech affiliate Ant Financial, closing a deal proposed five years ago, the company said Tuesday.

Why it matters: The deal further strengthens Alibaba’s relationship with the fintech firm and bumps up its valuation.

• The transaction hints that Ant Financial’s long-anticipated initial public offering (IPO) could be near. Ant Financial is one of the world’s most valuable startups after closing a record $14 billion fundraise at $150 billion valuation in June.

Details: Alibaba announced Tuesday that it had received the green light to take a 33% equity interest in Ant Financial in newly issued shares.

• The deal officially terminated the profit-share agreement that required Ant Financial to pay Alibaba royalties and technology service fees equivalent to 37.5% of its pre-tax profits each quarter, the company said.

Context: In 2014, the Alibaba and Ant Financial agreed on a profit-sharing deal in the run-up to Alibaba’s IPO in the US.

• That profit-sharing agreement followed a dispute in 2011 between Alibaba and major shareholders Yahoo and Softbank. Alibaba founder Jack Ma spun Alipay, the company’s most prized asset, out of Alibaba into a separate entity he controlled, citing concerns about restrictions on foreign investors in Chinese payment companies and sparking outrage from investors.
• In February 2018, Alibaba said it would take a 33% equity stake in Ant Financial, ending the profit-sharing agreement and giving Alibaba shareholders a share of the financial business.
• Since its inception in 2004, Ant Financial has grown into a financial technology giant that offers payments, micro-lending, digital banking, and insurance services. It also operates the country’s largest money market fund.
• Alibaba and Ant Financial already have a close relationship. The two previously participated in investments including in India’s fintech startup Paytm.

Tencent and Alibaba are refusing to cooperate with government-backed credit scoring company Baihang’s request for customer loans data, Financial Times reported on Thursday. The tech giants had been asked to grant access to their customers’ credit data and personal information.

Why it matters: Baihang, the only personal credit score provider in China, has been struggling to get credit data from major tech companies, which are reluctant to relinquish control over valuable user data.

• The People’s Bank of China (PBOC) launched Baihang last year in a bid to create a unified national system for credit data. The PBOC made Chinese fintech giants, including Tencent and Ant Financial, the shareholders of Baihang, expecting a smooth handover of consumer data.
• Tencent, the operator of Chinese messaging and payment platform WeChat, and Ant Financial, the company behind mobile payment app Alipay, hold troves of customer data—perhaps more than any other companies in China.

Details: Baihang was hoping to get personal information and credit data such as names, ID and phone numbers, and credit histories from Tencent and Alibaba, an unnamed employee told the Financial Times, adding that only three of the eight shareholding companies have agreed to share their data with Baihang.

• A Tencent employee familiar with negotiations between Baihang and its member companies confirmed that the tech giants were not sharing loan data. “If it had been the [PBOC] itself asking for data, rather than this arm’s-length lower-level body, then perhaps they would have given it,” the employee said.

Context: The central bank launched Baihang in March last year. The system was set up to collect information and pool data from online financial services and lending platforms outside the traditional system.

• Baihang was established in conjunction with eight other Chinese the companies including Ant Financial’s Sesame Credit, Tencent’s Tencent Credit, as well as ride-hailing firm Didi Chuxing and online dating service Baihe.com. Private companies have since been barred from providing credit information services on their own.
• Baihang has been trying to expand the coverage of the system. Earlier this month, the central bank formally included the troubled online peer-to-peer (P2P) lending sector to its credit reference system as the clampdown on illegal financial services continues.

Ant Financial will fully integrate Alipay’s mini-program feature with Chinese social media platform Sina Weibo, the company announced on Tuesday at an event in Hangzhou.

Why it matters: Mini-programs have become strategically important to the Alipay platform since its introduction a year ago. Merchants on the Alipay mini-program platform will benefit from tapping Weibo’s vast social network to expand marketing campaign reach.

• Alipay and Weibo have around 250 million shared users.

Details: According to Ant Financial, Weibo will be able to leverage its vast social network to enable Alipay merchants to expand their reach to more users. Alipay mini program’s rich ecosystem of services will help merchants on Weibo convert content into services and products.

• For example, fast-food chain Burger King, which is already connected to e-commerce site Tmall’s mini programs as well as food delivery platforms Ele.me and Koubei and navigation app AutoNavi, could use Weibo to widen the reach of its marketing campaigns.
• According to Tian Liying, vice president of Weibo, the partnership will avail companies and merchants the ability to connect users, content, services, and social media. Alipay’s mini-program can add value to a wide range of content verticals on Weibo such as travel, medical and health, e-commerce, and food and beverages, Tian added.
• Consumers’ fragmented attention span has created new challenges for traditional business models, said Guan Zhong, general manager of Alipay open ecosystem. Mini programs, which allow users to hop back and forth between apps and are designed for quick usage, help bridge that fragmentation. Additionally, the data-driven mini-program platform enables businesses to provide the right products and services to the right crowd at the right time, Guan said.

Context: Alipay introduced the mini-program feature a year ago and has committed a substantial amount of resources to building out an ecosystem. According to Ant Financial, Alipay amassed over a million mini-programs over the past year and accumulated 500 million monthly active users, quickly catching up with rival WeChat which got a head start.

• Alipay’s mini-program platform is integrated with more than 10 applications within Alibaba’s ecosystem, including AutoNavi, Tmall, and enterprise app DingTalk.
• Alipay and Weibo had previously integrated their platforms to a limited degree, enabling features such as the ID login feature.

At the Smart China Expo in Chongqing on Monday, Jack Ma, chairman of e-commerce behemoth Alibaba, defended the internet finance industry against recent criticism brought about by the troubled P2P lending sector.

During his speech (in Chinese) at the Expo’s Big Data and Smart Technology Summit, Ma said the term “internet finance,” a term he coined several years ago, should not be lumped together with the troubled peer-to-peer (P2P) lending industry.

Why it matters: Ma, the founder of internet finance giant Ant Financial’s parent company, seeks to differentiate the startup from the P2P lending sector, which has been in regulator crosshairs. He had previously expressed concern that problems in the sector will impede the development of internet finance.

• Ant Financial operates a host of internet finance platforms including money market fund Yu’e Bao and consumer lending units Jiebei and Huabei.

“P2P lending was not internet finance from the start. It is just an industry of illegal financing businesses that have websites. We shouldn’t blame the problems all on internet finance. Of course, internet finance still has a lot of room for improvement.” (our translation)

—Jack Ma, chairman of Alibaba

Details: During his speech, Ma praised internet finance as the financial system of the 21st century and the “greatest achievement of the era,” and cautioned against outmoded approaches to regulation.

• Not all technology innovations are high-risk, and regulation does not guarantee that it will be free of risk, said Ma. Internet finance that relies on big data for risk control is highly efficient and low-risk. “Sometimes inappropriate, closed-minded regulatory efforts are inherently high-risk,” Ma said.
• Internet finance is capable of serving more small- and medium-sized enterprises and enables better individual access to financial services compared with the traditional finance industry, said Ma.

Context: Ma also spoke out about P2P lending at last year’s expo, saying that sooner or later the P2P lending industry would run into significant road blocks.

• Alipay launched P2P lending platform Zhao Cai Bao in 2014, which has since turned into an investment platform.
• Last week, the central bank released a three-year plan aiming to better regulate the fintech sector and control financial risks.
• After virtually unchecked growth during the early years of development, the rising number of illegal platforms and scams in the P2P lending industry prompted the government in 2017 to clamp down on fraud and risky financial practices.

Alibaba’s fintech affiliate Ant Financial posted strong profits in the second quarter, contributing around RMB 1.63 billion ($237 million) in royalty and software technology services fees to the Alibaba as part of their profit-sharing arrangement, according to the e-commerce giant’s earnings report released on Thursday.

Why it matters: Despite macroeconomic slowdown and recent mobile payment regulation that squeezed its revenue stream, Ant Financial was able to grow.

• The company continued to expand its wealth management and other financial product offerings in the domestic market as grow its international presence. It operates one of China’s most used mobile payment app, Alipay, which has been on a global expansion spree in recent years.
• Last year, Ant Financial was running at a loss in two quarters partly due to ramped-up spending on investments and user acquisition.

Alibaba doubles quarterly net profit thanks to e-commerce and cloud

Details: Ant Financial’s payments to Alibaba in the second quarter tripled from the quarter prior, and was the highest in almost two years.

• Ant Financial posted RMB 4.3 billion ($611 million) profit in the second quarter, according to Bloomberg, calculated based on the arrangement that stipulates Ant Financial to pay 37.5% of its pre-tax profit to Alibaba as royalty payments and software technology services fees.
• Despite profit growth, Ant Financial’s contribution to Alibaba’s operating income remains minimal, around 7%.

Context: China’s fintech market is entering a new phase of steady growth, a contrast from the past fueled by neck-and-neck competition with arch-rival Tencent, the operator of WeChat Pay.

• However, China’s slowing economy and continued tightening regulations to reduce financial risks might create some hurdles for the fintech firm.
• Earlier this year, the government started enforcing a new policy that prevented third-party payment platforms to earn interest from clients’ money by depositing it into bank accounts.
• Alibaba is expected to take a 33% stake in Ant Financial and abandon the profit-sharing arrangement. However, the deal has been pending since last February.

Ant Financial has hinted that its mutual aid platform could collaborate with insurance providers as user numbers continue to swell, Chinese media reported.

Why it matters: Mutual aid platforms like Ant’s Xianghubao started gaining traction in China last year, especially among those who have typically not been well-served by the country’s healthcare system. They enable members to share treatment costs equally, and are often seen as more accessible and affordable than traditional products.

• Other Chinese tech giants have also dipped their toes into mutual aid over the past year. Tencent is a major investor in insurtech startup Waterdrop, which closed a RMB 1 billion ($142 million) funding round in June.
• Retailer Suning previously said it was testing (in Chinese) a mutual aid product.
• Xianghubao and other mutual aid platforms have faced regulatory scrutiny (in Chinese) from regulators for promoting their products as insurance products.

“Xianghubao and insurance products complement each other.” (our translation)

—Yin Ming, vice-president of Ant Financial

Details: Xianghubao could be open to working with insurance players to raise awareness and develop structuralized and diversified health care products.

• The collaborations will not drive traffic but educate consumers on products.
• Yi highlighted real-name verification, no cash pools, end-to-end risk controls, and transparency as four key principles.

Context: Launched in October, Xianghubao hit 10 million users in less than a week by leveraging Alipay’s vast userbase.

• The company said in April that it aims to reach 300 million users within two years.
• Average fees are shared by all members, and they contribute between RMB 0.1 and RMB 0.5 twice per month.
• Xianghubao charges an 8% premium each time compensation is paid out, which is lower than the 40% average from traditional non-life insurers and 20% from personal insurers.
• Users have questioned (in Chinese) the significant rise in Xianghubao fees as well as the rising number of members who have received aid. The company said the increased cost is partly due to rapid user growth.
• Alipay offers insurance policies to consumers as well as businesses by partnering with other insurers like Taikang Insurance and Ping An Insurance.

China’s central bank has approved the expansion of Ant Financial’s independent AlipayHK e-wallet throughout mainland China, allowing for visitors from Hong Kong to pay using their own currency.

Why it matters: AlipayHK beat Tencent’s WeChat HK to the punch as the first Hong Kong dollar-denominated mobile payment app across China and Hong Kong. It will allow Hong Kong visitors to mainland China to pay without the need to exchange currency or create bank accounts on the mainland.

• The expansion could help AlipayHK to boost adoption in the Hong Kong payments market, dominated by the Octopus contactless card.
• WeChat Pay HK’s coverage in China’s mainland is limited to certain merchants like ride-sharing platform Didi, lifestyle super app Meituan, and Walmart. The service is available nationwide at these vendors.

Details: The People’s Bank of China rubber-stamped the application last week and further details will be announced when the full service goes live, an Alipay spokesperson told TechNode on Monday.

• The e-wallet is operated by an independent local team under a joint venture between CK Hutchison Holdings and Ant Financial, and can be used by account holders from Hong Kong’s commercial lenders.
• AlipayHK has been available in nine neighboring cities in China’s Guangdong-Hong Kong-Macao Greater Bay Area, as well as in the Kyushu region of Japan since March.
• The service has more than 2 million users—roughly a quarter of Hong Kong’s 7.5 million residents—and is supported at 50,000 retail outlets across Hong Kong, according to a company statement in March.

Context: Cash and Octopus card remain the payment methods of choice among Hong Kong residents despite the rising use of mobile payments.

• Some 99% of respondents to a survey from Hong Kong Productivity Council regularly paid in cash in the first half of 2018, while 97% used Octopus.
• The use of mobile payments rose to 48% in the second half of the year from 20% in the first half, according to a follow-up survey during the second half of 2018. Changes to cash and Octopus card use were not mentioned.
• The survey was conducted independently of its sponsor, Alipay HK.

Users of Ant Financial’s mutual insurance product have surged by around half to 76 million over the last three months while funding has been provided for 597 critically ill users, the Hangzhou-based firm said on Monday.

Why it matters: The product is a disruptor for the traditional insurance industry as it lets users share payments for seriously sick individuals. The low payments and high compensation are shaking the business models of traditional players.

• Each user paid RMB 0.51 (around $ 0.074) in late June, according to the latest data. The services has attracted low-income individuals who had never considered traditional insurance before.
• In China, the term “returning to poverty due to illness” is used to describe middle class individuals who run out of assets when paying for treatment due to a lack of full insurance coverage. It is especially common in rural areas, where many of Xianghubao’s users are located.
• The product covers 100 critical illnesses with a maximum compensation of RMB 300,000 and plugs a gap not covered by the government and traditional insurers so far.

“Xianghubao and insurers are not competitors, we are educating people about risk management and popularize insurance services.”

—Ant Financial Vice-President Yin Ming

Details: Launched less than a year ago, Xianghubao has attracted a great number of users especially in tier-three cities, small towns and villages. However, the product is loss-making.

• Over half of users are from tier three cities and 32% users are from small towns or villages, according to 36 Kr.
• Ant did not consider making a profit from the product, but will cut costs by “technical methods” in order to strike a balance, said Yi Ming, vice-president of Ant Financial, who oversees the product.

Context: Launched in October, Xianghubao hit 10 million users in less than a week.  Alipay users who pass a credit evaluation can join the program.

• Average fees are shared by all members and they pay in between RMB 0.1 to RMB 0.5 twice per month.
• Xianghubao charges an 8% premium for each time compensation is paid out, which is lower than the 40% average from traditional non-life insurers and 20% from personal insurers.

China’s leading fintech firm calls for “open-minded, prudent” approach to cryptocurrency Libra – Global Times

What happened: An executive from Ant Financial, the operator of mobile payment platform Alipay, has called for an “open-minded, albeit prudent approach” to Libra, the new cryptocurrency project Facebook announced last week. Zhang Hui, director of Ant Financial’s blockchain department, said yesterday the company is paying close attention to its development. Blockchain technology will have a major impact on the world’s financial services and businesses in the future, he said.

Why it’s important: Facebook’s cryptocurrency project is attracting global attention—including from China, which has outlawed cryptocurrency trading and blocked Facebook. Ant Financial is the latest Chinese tech company to express views on Libra, following Tencent CEO Pony Ma’s comments last week. Meituan CEO Wang Xing hailed Libra as “a genius design.” Some industry watchers see Libra as Facebook’s answer to digital payment platforms widely used in China. Ant Financial is a major blockchain player in China and has been investing heavily in R&D for the technology and applications, particularly in public services.

滴滴发内部员工信：宣布整合升级成立两轮车事业部 – Tencent News

What happened: Didi has formed a two-wheeler business group according to an internal letter released late Monday, a person close to the company confirmed with TechNode on Tuesday. The company is ramping up efforts to compete for China’s 300 million motorists with the new group which combines its bike-rental business unit and another team running a platform named Jietu for motor scooter rentals.

Why it’s important: Chinese mobility giants are expanding their businesses from offering ride-hailing services to serving users with two-wheelers for short rides, hoping to diversify revenues. Ant Financial-backed Hellobike, also known as Hello TransTech, is setting up a nationwide battery exchange and charging network for electric bikes and scooters in a RMB 1 billion ($145 million) partnership with the world largest battery maker, CATL. On average, there are 700 million e-bike rides each day in China, triple that of shared bikes, Yang Lei, CEO of Hellobike said at a public event last week. China had more than 250 million electric motor scooters on the streets as of late 2018, and that number is expected to increase to 400 million by 2050, reported China News citing figures from an industry association.

New complaints from China’s tech employees have surfaced about another, more demanding, work schedule. This time it is about one of China’s most high-profile startups.

In a post that has since been deleted on professional networking platform Maimai, employees of Alibaba affiliate Ant Financial discuss a work schedule even harsher than the widely criticized 996, which refers to working from 9 a.m. to 9 p.m. six days a week.

“I can’t bear the days at Ant Financial anymore. It’s been non-stop ‘10-12-6,’” an anonymous user wrote in a post dated June 6. “I worked on the May 1 holiday and again on Dragon Boat Festival. And I feel bullied working with a bunch of people who “fling black pots’ at each other, snatch opportunities, and take credit for them… I’m really tempted to just quit and find another job,” the user added. “Fling the black pot” is internet slang that means to blame someone else.

The anonymous employee referenced “10-12-6,” a work schedule of 10 a.m. to 12 a.m., six days a week that is a play on the infamous 996 work schedule which sparked an online protest against China’s tech firms after the post on GitHub went viral in March.

Pressure to overwork seems to fall on those that work in the core business unit. “The core financial business unit’s work hours are the longest, and has no limits whatsoever,” another anonymous user wrote as a comment under the original post. One other anonymous user complained that Ant Financial often held late-night work meetings.

“Ant is really disgusting. I’m already looking for another job, ready to quit. Now I’m just trying to pass the time at work. I don’t have to worry about this year’s 3.25 anyway,” another Maimai user commented, referring to Ant Financial’s performance evaluation system’s rate of 3.25, meaning the employee “failed to meet expectations.”

However, a few users disagreed with claims of overwork, saying that the users were exaggerating. “That’s nonsense. I get off work at around 9 p.m. every day, and I don’t work on weekends,” another user commented.

On Sunday, another Ant Financial employee wrote in a post (in Chinese) on Maimai soliciting career advice. Addressing another user who disparaged comments from users complaining about working past 8 p.m., an Ant Financial employee commented under the post, “It’s always been 10-12-6, do you want to try it out?”

Following the public outrage sparked by the GitHub post, China’s state-owned media Xinhua News Agency condemned the 996 work schedule, saying that such work hours are illegal according to the labor law. Still, the harsh work practice has been endorsed by some high-profile supporters.

Alibaba was not called out in the original viral GitHub post, which named retail giant JD.com and e-commerce platform Youzan for adopting the 996 work practice. However, Alibaba’s billionaire founder Jack Ma sparked controversy in April when he commented on the 996 work culture, saying that to be able to work such long hours “is a huge blessing.”

Employees from Microsoft, which owns Github, circulated a petition asking the company to protect Github after reports that the repository was being blocked from certain Chinese browsers. The petition also included a statement of support for Chinese tech workers.

A campaign to send official copies of China’s labor law to the Alibaba headquarters was launched on GitHub in reaction to Ma’s comments, which soon gathered support from more than a thousand users.

Citigroup Sees Asian Firms Like Ant Financial Setting the Pace – Bloomberg

What happened: US banking giant Citigroup is looking to use financial technology and services that have caught on in Asia, such as mobile payments and credit pre-approvals, as it draws up a road map for its global digital strategy. The company has been building out its mobile app back home, and is taking notes from Chinese fintech giant Ant Financial. Alibaba’s fintech affiliate has created an entire financial services ecosystem, Stephen Bird, Citigroup’s consumer banking chief, said on Wednesday at a conference in New York. “We’re using the Far East as a clarion call as to where it’s all going,” Bird said.

Why it’s important: Emerging markets in Asia, namely China and India, are adopting fintech at rates faster than many developed countries. China in particular has become an important destination for financial service providers looking to expand their digital business. China’s established companies like Alibaba and Tencent have been cultivating their fintech business and developing technologies like mobile payment apps. China is signaling that it may open up its financial markets, beckoning foreign banks and other financial service providers.

China’s Ant Financial, Vanguard form Shanghai-based venture: government records – Reuters

What happened: Chinese fintech giant Ant Financial has set up a joint venture with the Shanghai unit of US-based asset management firm Vanguard, according to government records. The new entity, listed under Vanguard in the national registry for businesses, has registered capital of RMB 20 million ($2.9 million). Huang Hao, president of digital finance business group at Ant Financial, is listed as its legal representative. Ant Financial holds a 51% share and Vanguard’s Shanghai unit has a 49% stake, according to Chinese media. The scope of business is listed as investment advisory.

Why it’s important: Vanguard, one of the largest public mutual fund providers in the world, launched its Shanghai unit in 2017. The aim of the new joint venture, some experts believe, is for Vanguard to obtain a mutual fund license in China. Chinese regulators have not officially started issuing licenses to wholly foreign-owned enterprises like Vanguard. Ant Financial, which has grown to become the world’s most valuable unicorn in fewer than five years, has attracted the attention of foreign financial service providers. Last September, US-based insurance provider Fidelity Guaranty & Life announced a research partnership with Ant Financial.

用奋斗助力数字智能城市建设 – 河北新闻网

What happened: Ant Financial is planning to build a fintech innovation center in the Xiong’an New Area, said Ren Haixia, head of Alibaba’s Xiong’an project, though she did not reveal a specific timeline for the launch. The company has rolled out a blockchain-based home rental platform, which is part of the larger plan for the innovation center. An Ant Financial spokesman confirmed to TechNode that it has collaborated with local entities on fintech projects. There will be more cooperation between Alibaba and the special economic zone and more projects are underway, including blockchain and cloud infrastructure development, according to the Hebei news outlet citing Ren.

Why it’s important: The Xiong’an New Area is a special economic zone proposed by President Xi Jinping, and established in 2017. It is located outside of Beijing in the northern Chinese province of Hebei. With favorable policies to promote the growth of the high-tech industry, the Xiong’an New Area has attracted China’s tech giants, including Alibaba, Baidu, and Tencent, to set up branches. Alibaba and its fintech arm, Ant Financial, entered into strategic cooperation agreements with the economic zone in late 2017 and pledged to turn it into a “prototype smart city.” So far, Alibaba has launched a cloud data center, an intelligent city planning platform, and a blockchain-based home rental platform. Cainiao, Alibaba’s logistics company, recently launched unmanned delivery vehicles in the zone.

Correction: This article has been corrected to reflect that Ant Financial has collaborated with local entities, not local government, on fintech projects.

Alipay has tripled its merchants in Europe amid ‘booming’ Chinese tourism market – CNBC

What happened: Alipay is making inroads in overseas markets despite being locked in a trade war with the US. The mobile payment giant has tripled the number of merchants in Europe accepting its service to “tens of thousands” in the past year, according to Roland Palmer, head of Europe at Alipay. Palmer dismissed concerns that trade war is weakening the growth of its overseas business, saying that the company is tapping into opportunities brought by Chinese tourists in Europe.

Why it’s important: Ant Financial, Alipay’s operator, has been expanding its business outside of China over the past few years. As its expansion in the US is hitting bumps amid trade tensions, the Chinese fintech giant has been focusing on markets in Europe as well as other parts of Asia. Last year, the US rejected Ant Financial’s acquisition of money transfer company MoneyGram over national security concerns. However, after its acquisition plan fell through in the US, Ant Financial successfully acquired UK-based payments company earlier this year.

Alipay to formally start its service in Nepal soon – Himalayan Times

What happened: Alipay, the mobile payment app operated by Ant Financial, may start formally operating in Nepal in a few weeks. According to local news outlets, the head of business at Alipay and representatives from Ant Financial’s compliance, legal, and account departments met with officials from the Nepali central bank last week to discuss the launch of the payment service. The Himalayan Bank, one of Nepal’s largest private banks, is in the process of applying for permission from the central bank to settle foreign exchange transactions on Alipay. Once the bank gets the green light, Alipay will be able to operate legally in the country.

Why it’s important: Alipay’s meeting with Nepali officials was held weeks after Nepal’s central bank issued a ban on the use of Chinese mobile payment services, namely WeChat Pay and Alipay. The central bank spokesperson stated that Chinese payment apps, widely used by tourists in the country, were not registered with authorities. Businesses that use the Chinese mobile payment apps can circumvent reporting the transactions. Foreign currency earnings are a main source of revenue for Nepal, which relies heavily on its travel and tourism industry.

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After Chinese authorities cracked down on cryptocurrencies and initial coin offerings (ICOs) two years ago, the hype surrounding the technology is noticeably muted.

During a panel on blockchain regulation at the Emerge by TechNode conference on May 23, Steven Wang, who heads the market research team at Ant Blockchain, said that the concept of blockchain was frequently linked with cryptocurrency in China before 2017. Now, there is a clearer distinction between the two buzzwords—a shift that Wang sees as positive. Companies are more interested in “landing blockchain applications that would actually solve real problems rather than just [creating] another new bubble,” Wang told TechNode in an interview following the panel.

Last year, Ant Financial said it identifies blockchain as one of the five key technologies that will dominate industries. It has been working with authorities on implementing the technology for use in public services including blockchain-based medical prescriptions and electronic invoices. The fintech giant officially launched its blockchain subsidiary Ant Blockchain in February.

Wang describes the regulatory environment for blockchain in China as pro-innovation. “There’s a lot of support from the relevant bodies and also from the industry organizations to push for blockchain development… I think it’s quite a strong push for blockchain to develop in a healthy way currently in China and it’s not something which we are afraid of,” said Wang.

Wang noted that government agencies are increasingly interested in blockchain and are inching toward an open attitude with more proven applications and actual use cases being implemented. “They are  more interested in coming to us to actually look for ways to collaborate and to use our technology to make their own public services more efficient.”

Outside of the public sector, Wang expects to see more corporations moving into the blockchain space this year and opening up their technology to other businesses.

Looking forward, Wang said the company plans to support more open source projects like Hyperledger Fabric, which it already works with. It is looking to make blockchain more accessible to other businesses, including those that are interested in the technology but lack the technical ability develop their own solutions.

Update: clarified Ant Blockchain’s existing relationship with Hyperledger Fabric.

Alibaba and Ant Financial increase stake in Alibaba Health – KrASIA

What happened: Alibaba and Ant Financial, its fintech affiliate, have agreed to ramp up their stake in pharmaceutical company Alibaba Health. Alibaba’s medical products subsidiary Ali JK will buy a total of 242.4 million shares while Ant Financial subsidiary Antfin will subscribe for 60.6 million shares, according to the document disclosed on Thursday. The Hong Kong-listed Alibaba Health will gain around HKD 2.3 billion (around $289.5 million) in cash from the new subscription agreement. The company said it intends to use the new funds to repay loans, finance ongoing business operations and expansion, and complete previously committed investments.

Why it’s important: Alibaba Health, which became a subsidiary of Alibaba in 2015, reported RMB 5 billion ($723 million) in revenue, a 109% increase, for the year ended March 31, 2019. The rapid growth in revenue is mainly driven by its self-operated healthcare products business, pharmaceutical e-commerce platform, and its consumer healthcare business. The move, which will deepen the cooperation between Alibaba’s health and its fintech arm, is the e-commerce giant’s latest push in China’s healthcare sector.Ant Financial’s online mutual aid platform Xiang Hu Bao has grown in popularity over the past year and is quickly expanding its healthcare offerings. Earlier this week the platform announced that it had approximately 65 million users since its launch in October.

Ant Financial has launched a new cancer-focused health plan on mutual aid platform Xiang Hu Bao to serve the growing number of senior citizens in China.

According to the company, the product hopes to better serve elderly users by establishing a separate mutual aid plan that focuses on cancer treatment. It does not cover other critical illnesses.

Online mutual aid is an increasingly popular low-cost health care product founded on the idea that when one person falls ill, everyone shares the burden. On the Xiang Hu Bao platform, which can be accessed via Alipay, members of the senior health care plan contribute less than RMB 1 per case, the company said, but at present there is no cap in the number of cases. The contributions are due twice a month, and each member is eligible for a one-time payout of up to RMB 100,000 (around $14,700), depending on the number of cases and severity of diagnosis.

The general health care plan that Xiang Hu Bao launched in October caps members’ monthly payments at RMB 188.

Individuals aged 60 to 70 years are qualified to enroll if they meet certain health conditions, and the assessment will be based on past cancer-related health records. The company told TechNode that the health plan implemented a “risk management model” to help with the assessment of health conditions, but it did not specify what the sort of data they use.

Xiang Hu Bao users can enroll their elderly parents to the health plan and fees can be deducted directly from their Alipay account.

Xiang Hu Bao, which has amassed more than 50 million users since its launch in October, and similar online mutual aid platforms has been causing quite a stir in China’s healthcare industry. Tencent-backed “insurtech” company Waterdrop Inc., which runs one of the largest mutual aid platforms in China, recently reached unicorn status after operating for three years.

Mutual aid platforms like Xiang Hu Bao appeal to those traditionally underserved by the existing health care system. They provide low-cost critical illness coverage options for those who struggle to afford private health insurance.

Update: This article has been updated to include details about the plan’s contribution and payout.

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Ant Financial’s Xiang Hu Bao is a platform within the mobile payment app Alipay that provides affordable online health plans.

A clue to how it works is in its name: It means “mutual protection” and is a nod to the concept underlying the platform where members agree to pitch in and help other members with their medical expenses.

Centered on the concept of low-cost health care, Xiang Hu Bao, and other similar platforms, are beginning to take hold—especially among those who have typically not been well served by the country’s medical system.

Members of mutual aid plans share health care costs equally, so there are no premiums. Participants of  Xiang Hu Bao health plan make contribution twice a month, which is often less than a tenth of a yuan, and, in return, they receive coverage for 100 critical illnesses.

In return for managing the process, Ant Financial takes an 8% administrative fee out of every payout.

Late last month, TechNode visited Peking Union Medical College Hospital (also known as Beijing Xiehe Hospital), a state-run general hospital located in Beijing’s Dongcheng district, to understand why online mutual aid plans like Xiang Hu Bao are gaining popularity.

Near the busy entrance of the hospital complex, family members waited in the afternoon sun while loved ones undergo surgery, while nearby, hundreds of patients lined up to have prescriptions filled.

TechNode searched the crowd for Xiang Hu Bao users to learn what impact, if any, the app has had on their lives. In the first hour of relentless searching, however, we had little luck.

Finally, we bumped into Huang Zekai, a 29-year-old Xiang Hu Bao user from the northeastern province of Jilin. Huang said a pop-up in one of the Alipay mini-apps led him to join the Xiang Hu Bao health plan.

“People nowadays care more about healthcare and there is an increasing awareness around it,” Huang told TechNode.

Huang hadn’t given it much thought because the payment amount automatically deducted from his Alipay account each month is trivial.

Huang has a stable job in international trade. Better off Chinese people like him are increasingly turning to private insurance for better coverage and lower co-payments than public insurance.

But Huang is aware that many others in the country don’t have the same privilege.

Huang said one of his close friends working in the floral business received help from another online mutual aid community after his friend’s mother’s accidental fall last month that caused injuries around her thoracic area. The operation cost more than RMB 500,000 (around $74,200), Huang said he donated RMB 7,000 to assist his friend through Tencent-backed insurtech company Waterdrop Inc. (also known as Shuidi).

“I think the most important aspect for me is that someone benefited from such services,” said Huang.

Online mutual aid plans like Xiang Hu Bao takes on a more meaningful aspect—it allows those more fortunate to give back to the society, by donating and pitching in other participant’s medical expenses.

Ant Financial announced last month that its online mutual aid platform had amassed more than 50 million members since its launch in October. Xiang Hu Bao is aiming to have 300 million users—roughly a fifth of the population in China—on its platform in the next two years.

Other Chinese tech titans like, Tencent and Suning have made moves into the mutual aid space over the past year. For example, Waterdrop Inc. closed a RMB 500 million ($74.3 million) funding round led by Tencent in March and is now seeking new funding at a valuation of over $1 billion. The company’s mutual aid platform Waterdrop Mutual has over 78 million members. Meanwhile, Chinese retailer Suning announced last month that it was testing (in Chinese) its mutual aid product “Ning Hu Bao.”

Anyone with a score of 600 or higher in Sesame Credit, the credit scoring system developed by Ant Financial, that meets the health conditions can join the plan. The 600 level is considered a “benchmark” score and is what everyone starts off with when first opt-in to the Sesame Credit system.

The health plans, which cost significantly less than private insurance policies, have gained popularity over the past few years, especially among rural and underserved parts of the country.

Although it is also popular with white collar workers like Huang, Xiang Hu Bao is popular with less well off citizens. For example, some 47% of Xiang Hu Bao’s participants were migrant workers and 31% were from rural regions, Ant Financial said in April.

Significant strides

China has made significant strides in healthcare over the years. In a decade, the rate of basic healthcare coverage went from 22% in 2000 to nearly 95% in 2011.

However, even with improved access to public health care, out-of-pocket payments remain high, and access to medical care for the country’s rural citizens is worse compared to their urban counterparts.

Another couple at the hospital, who declined to be named, had traveled from Inner Mongolia for the wife’s routine check-up after her thyroid surgery. The husband, a gardening worker in his early thirties, said he enrolled in Xiang Hu Bao after a colleague recommended it. He said he pays an annual fee of less than one hundred yuan per person, which is an affordable option for him to get additional healthcare coverage for himself and his three-year-old son.

“It doesn’t cost us a lot of money and it adds an extra layer of protection,” said his wife, who teaches preschool. In her early thirties, lean and fair skinned, she sat on the pavement outside near the hospital entrance playing online mahjong on her smartphone.

Although both her husband and her young son are covered by Xiang Hu Bao, she is not. She’d applied for Xiang Hu Bao and another mutual aid plan Shuidi Huzhu, she said, but was rejected both times because of her thyroid operation, which left a visible scar that runs across the right side of her neck.

“It’s like I’m being blacklisted,” she joked.

One of the kids in the class she teaches received a payout of RMB 170,000 ($25,344) for his treatment for leukemia, the teacher added. Though short of the maximum payout of RMB 300,000 that the family had hoped to receive, it was still a financial burden lifted off of their back.

For a long time, public knowledge and awareness of health care and insurance remained quite low in China, said You Jia, a life insurance worker from Changchun, capital of the northeastern province of Jilin who now works in Beijing for pan-Asian insurance company AIA Group.

It wasn’t until two years ago that the public became more knowledgeable and aware of health insurance, which had to do with the government’s policy push to improve health care and reduce poverty caused by illnesses.

Online mutual aid plans like Xiang Hu Bao gained traction because they are inexpensive relative to health insurance policies. For those with little understanding of health care products, You said, the cost becomes a much bigger factor.

What Xiang Hu Bao offers seem like a better deal: members only need to put aside a few yuan every month, “a pack of cigarettes or a bottle of liquor” as You puts it, unlike traditional health insurance products that ask for larger sums of money annually. You said, however, such online health plans complement but do not replace traditional insurance.

You believes that with the government further push to improve basic health care and educate the public about health products like insurance, online mutual aid, and other inexpensive health care products will effectively bridge the gap of the urban-rural medical care gap.

Also at Peking Union Medical College Hospital, another middle-aged couple who had traveled from rural Henan province to visit their children said they were unfamiliar with online health plans, or, for that matter, the public health care system.

They said they were illiterate, and received health care the way most residents from their agricultural town did: They paid cash to treat minor ailments at inexpensive community clinics.

In some ways, the couple, who were nervous to speak with reporters and declined to give their names, belong to a demographic group who could be well-served from a mutual aid platform like Ant Financial’s.

But they are also precisely the same kind of people Ant Financial does not want in their fund as it begins to grow: As older adults, they have a higher chance of requiring expensive care. Xiang Hu Bao only allows users between the ages of 30 days and 59 years old and does not admit those with pre-existing conditions.

Leveling the healthcare system

The purpose of online mutual aid plans like Xiang Hu Bao is to complement public and commercial health insurance plans with wider coverage, rather than provide an alternative to those products, as Ant Financial has emphasized after facing regulatory scrutiny (in Chinese) from Banking and Insurance Regulatory Commission for promoting it as a health insurance product.

Chinese retailer JD.com tested its online mutual aid plan “JD Hubao” in November but was forced to take it down after just one day.

While online mutual aid plans are not necessarily patching up all the holes in the healthcare system, there is a clear need for affordable and adequate healthcare plans that such services are addressing.

The existing public health schemes in China cover only a portion of medical expenses, which often still leaves individuals saddled with hefty out-of-pocket payments. On average, Chinese still have to cover around 30% of their medical expenses out of their own pockets according to OECD figures in 2015, which is much higher than that of advanced economies like the US, Japan, and South Korea.

Moreover, the reimbursement of medical fees can vary considerably from urban to rural areas—lower for rural citizens compared to their urban counterparts—which has exacerbated inequality in China’s healthcare system.

Another insurance professional—whose company may soon launch a competing product—agreed to speak to TechNode on background. Health care products that cover critical illnesses could help bridge that gap, however, there is an inherent risk with mutual aid plans: members in the plan share medical costs, so if members exit the program, monthly rates could go up, which would only drive more people to leave.

While online mutual aid is not a new concept in China, the Xiang Hu Bao delivery mechanism is broader via Alibaba’s channels, which gives it an upper-hand in terms of expanding its reaching and growing its user base, the insurance industry worker added.

Additional reporting by Cassidy McDonald.

余额宝规模继续缩水 资金管理规模降至2年来最低水平 – TechWeb

What happened: Ant Financial’s Yu’e Bao, the world’s largest money market fund, has shrunk further to around RMB 1 trillion (around $155 billion) as of the end of March, according to quarterly figures from Chinese asset management firm Tianhong, which manages the fund. The approximate 8% drop from the previous quarter brought Yu’e Bao’s asset under management down to a two-year low. However, industry analysts noted that the rate at which the fund is shrinking has slowed, which might mean that the scale of Yu’e Bao is inching toward stabilization.

Why it’s important: Yu’e Bao has been on the Alipay platform since 2013, becoming the world’s largest money market fund in April 2017. According to Yu’e Bao’s 2018 annual report, the platform gained 114 million new users last year. However, its rapid growth invited regulatory curbs due to worries over liquidity risks. Ant Financial-controlled Tianhong has been trying to reduce its reliance on Yu’e Bao and diversify by expanding into the cross-border business.

Alipay to Spend USD448 Million Plugging New Face Scanner – Yicai Global

What happened: Ant Financial is pledging RMB 3 billion ($448 million) to promote its point-of-sale (POS) payment device “Dragonfly” that allows Alipay users to pay using their only their faces. Alibaba’s fintech arm released the second generation of Dragonfly earlier this week, which boasts a lower price and improved hardware design. The new version is 30% cheaper than its predecessor at RMB 1,999. As part of the promotion, the company is offering pre-sale discounts and incentives of up to RMB 1,200 to encourage adoption among merchants.

Why it’s important: Ant Financial first debuted the “smile-to-pay” facial recognition system in September 2017 for commercial use and then replaced it with the Dragonfly POS system in December 2018. It has been expanding the rollout of its facial recognition payment device. Dragonfly POS devices have been deployed in more than 300 cities across China since its launch. Earlier this month, it was introduced outside of the mainland for the first time in Hong Kong. The technology will likely become more prevalent in the country now that it is being experimented in public transportation and shopping streets. Alipay, one of China’s largest mobile payment apps, has more than 900 million active users worldwide as of November 2018.

Ant Financial’s online healthcare platform Xiang Hu Bao has reached 50 million users since its launch in October. The fintech giant said it aims to provide basic healthcare plans to 300 million people within the next two years with the platform, which is growing at a pace faster than Alipay’s money market fund Yu’e Bao, according to the company.

Xiang Hu Bao (literally, “mutual protection”) is an online mutual aid platform in the Alipay app that provides a basic health plan that covers 100 illnesses. Participants in the plan can receive health care coverage, as long as they agree to pitch in and help out with other participants’ medical expenses—bearing the risks and expenses together as a collective. Anyone with a sesame credit score of 600 or higher that meets the health conditions can join the plan.

Xiang Hu Bao is not a health insurance product, the company said, but it complements other health insurance offerings in the market. For 2019, the amount each participant will have to contribute is capped at RMB 188 (around $28) per month.

Such mutual aid platforms are gaining traction in China, where access to private health insurance is lacking. Other tech giants have expressed interest in the emerging healthcare business. Just yesterday, Chinese retailer Suning announced that it is testing (in Chinese) a similar mutual aid plan called “Ning Hu Bao.”

However, such mutual aid services swim in somewhat murky regulatory waters. When Ant Financial and Chinese insurance company Trust Mutual Life jointly launched Xiang Hu Bao, they promoted the healthcare service as insurance policies. A month after launching the service, Ant Financial rebranded the product to a “mutual aid plan” after regulators warned it about misleading product promotions. Unlike conventional insurance companies, the company that underwrites such mutual aid products barely bear any risks.

In November, Alibaba rival JD.com also tested a similar online mutual aid insurance plan “JD Hubao” but took it down (in Chinese) after just one day due to regulatory scrutiny.

Ant Financial is currently experimenting with blockchain technology to assist with authentication and notarization of evidence for supporting claims.

Correction: This article has been corrected to reflect that anyone with a sesame credit score of 600 or higher can join the mutual aid plan and not a credit score higher than 650 as previously reported.

Alipay is teaming up with Canadian cross-border payment provider SnapPay to bring the popular mobile payment app to grocery chain FoodyMart, a move that will further expand Alipay’s footprint in North America.

SnapPay, a Canadian partner of Alipay International, allows merchants in Canada and the US to accept digital payments from Chinese consumers in their local currencies using the Alipay app. The company said the solution benefits both retailers and consumers by reducing fees for merchants and lowering cost of purchase for consumers.

“North American retailers gain access to billions of untapped potential revenues by simply offering their customers the option to pay with the mobile apps and currency that they’re familiar with,” said Chris Renton, Chief Growth Officer of SnapPay.

While mobile payments in North America are still in the beginning stages compared with China, said Renton, the company sees tremendous potential for growth in Chinese tourists’ strong spending power and the millions of Chinese immigrants and students living in the country.

Chinese outbound tourism spending grew to $261 billion in 2016, an 11-fold increase of the amount spent a decade earlier. According to marketing research firm Nielson, more than 90% of Chinese tourists would use mobile payment overseas given the option.

SnapPay CEO Spencer Xu says that merchants have seen success with marketing tools on its platform that are familiar to Chinese consumers, such as online promotional coupons and red packets.

Both Alipay, a subsidiary of Ant Financial, and rival WeChat have been plotting a global expansion over the past few years, and North America is one of the major markets that Alipay hopes to crack.

“We are glad to be working with SnapPay, one of our partners in North America, to better connect Chinese consumers to North American merchants and to bring about the most seamless experience for them,” said Yulei Wang, General Manager of Alipay North America.

Founded in Toronto in 2017, SnapPay now provides cross-border payment service in North America for Chinese payment companies including Alipay and WeChat Pay.

支付宝香港：港人前往大湾区需求大 将于3月打通网络 – 东方财富网

What happened: AlipayHK has announced that travelers from Hong Kong will be able to use the app in cities in the Greater Bay Area, including Shenzhen and Guangzhou, as well as in the Japanese city of Fukuoka beginning in March. The company said users will be able to make purchases at any locations that accept Alipay in the selected Chinese cities. In Fukuoka, AlipayHK users can use the e-wallet service at Daimaru Tenjin, a popular Japanese department store chain.

Why it’s important: This marks the first time a local Alipay partner has expanded into cross-border, offline payments. Alipay currently has nine e-wallet service partners including Paytm in India, Dana in Indonesia, and SnapPay in Canada.

Alipay launched the localized standalone app for Hongkongers in 2017, providing features such as mobile payment and P2P transfers in local currency. Alipay has been eager to expand its payment services in Hong Kong. In November, AlipayHK announced that users will be able to use the app to pay for subway rides as early as 2020, and that more than 25,000 retail outlets in Hong Kong now accept AlipayHK.

盒马鲜生：购物不购买塑料袋可获得21g蚂蚁森林能量 – PingWest

What happened: Alibaba’s Hema supermarket today announced on Weibo that its stores will not provide free plastic bags at checkout this Thursday (Feb. 28). If shoppers choose not to buy plastic bags or use free ones after Thursday they receive 21 grams of “green energy” points. The reward points will go into Alipay users’ Ant Forest carbon account. The initiative is part of a larger campaign launched by Hema and Alipay to encourage users to adopt a greener lifestyle. Hema said it expects the initiative to save over 12 million plastic bags and generate green energy points enough to plant 15,000 trees.

Why it’s important: Alipay’s Ant Forest gamifies personal carbon footprint tracking—as users accumulate enough green energy points, a real tree gets planted. The app is designed to encourage users to take up a greener lifestyle such as selling or buying second-hand goods and taking public transportation. Ant Forest, launched in 2016, is said to be the world’s largest platform for personal carbon accounts. The company claimed to have planted over 55 million trees covering around 507 square kilometers across the country since launch.

Ant Financial’s payment service Alipay will start charging a fee on credit card repayments next month, a move that comes amid rising operational costs and tightening regulation.

From March 26, the Chinese payment giant will start charging 0.1% on monthly repayments in excess of RMB 2,000 (around $300) to “ensure the sustainable development of its credit card repayment service,” an Alipay spokesperson said in a statement shared with TechNode.

The fee will not be applied to credit card bills below the monthly threshold, while users that exceed it will be able to use their membership points to increase the quota without incurring fees.

Alipay is not the only payment service that has been forced to start digging into their customers’ pockets. In August, rival WeChat Pay expanded its credit card bill pay fee policy from charging users who spend more than RMB 5,000 per month to also include all credit card repayments.

The government’s tightening regulatory control over the payment industry, which is aimed at reducing financial risks, has had a significant impact on platforms’ revenue streams. Last month, authorities implemented a new policy requiring non-bank payment companies to place their customers’ deposits in centralized interest-free accounts, preventing the companies from making handsome interest returns from their customers’ money.

There are other contributing factors to rising operational costs. In recent years, Ant Financial has been ramping up investments in research and development of technologies including blockchain. It has also devoted more resources to user acquisition and growth opportunities in the offline payments market.

Last June, Ant Financial closed a funding round worth $14 billion, The company said the funds would go towards its global expansion efforts, technology development, and hiring new personnel. Currently, Alipay has over 1 billion annual active users globally.

Apple Store目前已支持蚂蚁花呗24期免息服务 – TechNode Chinese

What happened: Apple China is now offering a 24-month interest-free payment option for shoppers using Huabei, Alipay’s virtual credit card service. The financing offer applies to all products in Apple’s online store, but only applies to iPhone products at Apple’s physical stores.

The Apple Store also offers interest-free financing options to customers of other partner companies in China, such as China Merchants Bank, Industrial and Commercial Bank of China, and China Construction Bank.

Why it’s important: Huabei, officially launched in 2015, is a consumer financing service that allows shoppers to pay for online purchases during the month after delivery. Through Huabei and its micro-lending unit, Jiebei, Ant Financial doubled the value of its consumer lending in 2018 to RMB 600 billion, despite increasingly tightened financial conditions. The Chinese government is taking measures to regulate the country’s rapidly growing financial sector.

刷脸支付进入五线城市 三巨头加持物联网“飞”到百姓身边 – Securities Daily

What happened: Facial recognition payment systems can now be found inside the supermarkets of lower-tier cities in China. As spotted by Securities Daily, customers can now use Alipay’s “Smile to Pay” system when purchasing groceries at supermarkets in Xinzheng, a fifth-tier city located south of Henan Province’s capital Zhengzhou. According to a supermarket employee, the payment system was launched a month ago.

Why it’s important: Alipay, operated by Alibaba affiliate Ant Financial, has been improving its facial recognition payment technology since it trialed the beta version of Smile to Pay in 2015. The company then launched the technology for commercial use in September 2017. Facial recognition is expected to become a mainstream payment method in China in the near future, and Ant Financial is not the only player in the field eager to lead in this area. Rival WeChat Pay has already implemented the payment system in various industries. Last December, Chinese bank card service provider UnionPay also implemented similar technology in convenience stores in Shanghai and Beijing.

支付宝：全球用户数已经突破10亿 – TechWeb

What happened: Chinese mobile payment service Alipay now has more than 1 billion users worldwide. The company said in an announcement that it has partnered with smart payment services in overseas markets including India and Thailand, which contributed significantly to its growing user base. According to Ant Financial’s official announcement, Alipay hit the 900 million mark in November last year.

Why it’s important: Ant Financial, the financial arm of Alibaba, is the most valuable fintech company in the world, with a valuation of $150 billion. According to Alibaba’s latest quarterly financial report, Alipay has over 700 million users in China and 70% of them have used three or more services provided by Ant Financial. Facing an increasingly saturated market at home, Alipay and rival WeChat Pay have taken their battle abroad to markets including Southeast Asia and Europe. Tourism is of the top factors driving the Chinese payment giants’ global expansions. Opportunities abound as other countries seek to cash-in on Chinese tourists’ spending power.

In this episode of the China Tech Investor Podcast powered by TechNode, hosts Elliott Zaagman and James Hull take a look back at some of the big events of 2018, the deluge of China tech IPOs in 2018, and make some predictions about 2019, including the much-rumored Ant Financial IPO.

They are also joined by Paul Triolo, the Head of Global Technology Policy at Eurasia Group, to talk about the tech “Cold War.” He has spent the better part of the past three decades focusing on China, the US, and the geopolitics of technology.

Please note, the hosts may have interest in some of the stocks discussed. The discussion should not be construed as investment advice or a solicitation of services.

Watchlist:

• Tencent
• Alibaba
• Baidu
• iQiyi
• Xiaomi
• JD.com
• Pinduoduo

Guest:

• Paul Triolo, @pstAsiatech

Hosts:

• Elliott Zaagman – @elliottzaagman
• James Hull – @jameshullx

Podcast information:

• iTunes
• RSS Feed
• Music: “Hey Ho” by Steve Jackson, Royalty

Until recently, Ant Financial is most commonly known as the parent of China’s default payment app Alipay, and therefore, a financial service in the eyes of most. However, the Alibaba affiliate is gradually finding a new position as a technology services company. By outsourcing all of its technical capabilities that have been mastered by running Alipay, the company is turning traditional financial service providers from competitive rivals to cooperative clients.

Ant Financial is opening up its technology capabilities to financial service institutions for them to solve problems in financial security, massive financial transactions, and blockchain applications announced Hu Xi, Deputy CTO of Ant Financial and Partner of Alibaba Group, at The Computing Conference. Open technology capabilities are expected to become the core monetization model of Ant Financial, according to the firm.

Ant Financial is more than just a financial tool

Started out as Alipay, Ant Financial tries to solve all the basic technical problems since its inception in 2004. After opening up its payments services to a wide range of online and offline businesses, Ant Financial announced an “Internet Booster” plan in 2015 to support the digital transformation of traditional financial institutions by sharing Ant Financial’s technological capabilities. The new announcement marked the company’s effort to speed up the initiative in providing standardized and comprehensive technical solutions to all the financial services.

Ant Financial’s technology-based solutions allow financial institutions to deliver services, from payments to risk management efficiently, all at scale. In payments, for instance, Alipay was able to process a record-breaking 256,000 transactions per second at the peak of the 2017 Single’s Day Shopping Festival.

The company has already partnered with over 200 financial institutions around the world, including over 100 banks such as Commercial Bank of China, China Merchant Bank, MyBank— China’s 1st commercial bank with core system running on a distributed architecture—over 60 insurers and north than 40 funds and securities.

For Ant Financial, the change also underlines a shift in the nature of its clients, from individual customers, where it already takes a grip through Alipay, to financial enterprises clients. Hu explained that a transition from customer-faced (2C) to business-faced (2B) business comes in line in a changing landscape in China.

“The past two decades, relatively the span of China’s internet history, was a period when customer-faced services experience a quick boom. Back then, there’s no digital infrastructure in China, so 2C service is a good place to start. But today’s China is under urgent need to increase efficiency, no matter it takes the form of a push to increase production capacity, upgrading traditional manufacturing industry or consumption upgrading. Digitalization of enterprises is a possible solution for it,” says Hu.

At the same time, Alibaba’s established foothold in the 2C market is expected to benefit a 2B foray thanks to deep industry insight and vast business connections.

Looking forward, Hu also touched on some of the technical explorations and challenges in the future, suhc as real-time secure computing on top of a large volume of IoT data, giving AI financial grade capabilities, pursuing continuous availability with zero data loss, making the digital world secure and trustworthy, and giving everyone a reliable digital identity.

微信之后，支付宝也接入银联，支付行业将有这些大变化–每日经济新闻

What happened: On September 14, a source told an NBD News reporter, Alibaba’s online payment platform Alipay inked an agreement with China’s UnionPay. The two will cooperate on card-less and barcode payments, with Alipay offering some payment clearing services through UnionPay. The news follows a similar development this past April, in which UnionPay announced a QR code payment partnership with WeChat Pay. According to Wang Pengbo of internet consultancy Analysys, Alipay’s partnership with a payment clearing organization was inevitable and also forms part of a nationwide trend.

Why it’s important: Since last year China’s government has been intent on regulating online payments, even setting up a new clearinghouse to act as an intermediary between third-party payment platforms and banks. In order to abide by regulations, both of the country’s major online payment platforms have now inked agreements with UnionPay, which will most likely benefit the official payment network. Changes to China’s online transaction ecosystem are still underway, however, with the possible side effect of constricting businesses.

Ant Financial and Huashan Hospital, a teaching hospital affiliated to Fudan University in Shanghai, have launched what is said to be the first blockchain-powered electronic medical prescription service in China, local media is reporting (in Chinese).

The new medical prescription platform, which can be accessed via the Huashan Hospital mini program in the Alipay app, keeps track of all records incurred the prescription process–from filing the prescription, dispensing the medication to delivering the medication to the patient’s hands–using blockchain technology. All records and information are traceable and cannot be tampered with.

The Huashan Hospital is the first hospital in the country to integrate this service. As of now, the new blockchain prescription service is only adopted by the department of endocrinology, however, if successful, it will be adopted hospital-wide, according to Zhang Qi, the deputy director of the IT department of the hospital.

Ant Financial is tapping into blockchain technology

This is not the first time Ant Financial has trialed its new tech at Huashan Hospital, one of the largest hospitals in Shanghai. In 2017, Ant Financial launched a service at the hospital to allow Alipay users with a credit score above 650 on Sesame Credit to use credit to pay for any medical fees incurred at the hospital.

Ant Financial also has been secretly experimenting with blockchain e-medical bills. In August, the Alibaba financial affiliate reportedly sent out nearly 600,000 blockchain electronic medical bills to patients over the course of two weeks.

Alibaba’s ambition in blockchain is well-recognized. In fact, the company has the most blockchain patents in the world thanks to its financial service arm. In July, MIT launched a new fintech initiative, in which it partnered with a selected group of global financial services to work on the development of real-world tech solutions in areas including blockchain. Ant Financial is the only Chinese company selected to be in the group.

Other Chinese tech powerhouses also show strong interest develop blockchain applications, not just in finance and logistics but specifically in the medical field.

In April, Tencent announced that it is partnered with Liuzhou (柳州市) in north-central Guangxi region to test a similar blockchain-powered system that allows patients to track their medical prescriptions (in Chinese).

China’s blockchain crazy is in full swing and a recent report from IPRdaily sheds more light on the trend. Chinese firms took 57 spots in a newly compiled “Top-100 Blockchain Enterprise Patent Rankings” list, according to the global intellectual property information media outlet. Chinese and American companies feature prominently on the list. Thirty-six companies around the world have over 20 public patent applications related to blockchain.

Chinese tech companies took half of the top 10. Alibaba, together with its affiliate company Ant Financial, tops the ranking with 90 related public patent applications. People’s Bank of China, China’s central bank, holds the fifth spot with 44 patents, followed by Tencent (40 patents), Fuzamei (39 patents) and VeChain (38 patents).

Virtually every major Chinese tech company has placed bets in the emerging technology. But holding patents is more of a strategic layout than an all-out push for some tech giants as compared with those who are focused squarely on the sector. Baidu, Huawei, Qihoo 360, Xiaomi all touch slightly on the trend with less than 20 patents.

China’s government is harnessing its data to make blockchain-based identity a reality

The force of government endorsement for the technology could be seen from the number of state-backed enterprises on the list. In addition to the People’s Bank of China, several state-backed enterprises have made to roster, including China Unicom, China Mobile State Grid Cooperation of China, Bank of China, China UnionPay, and China Merchants Bank.

Rising numbers of patents in an emerging technllogy also reflects a wakening IP awareness among China’s tech firms, which is the result of decade-long efforts.

China’s tech firms are adapting to an increasingly IP sensitive environment

2018 marks the first year that the application of blockchain technologies has become more widespread and an industry-wide ecosystem has been created. This can be seen in the fact that the number of patent applications related to blockchain technologies has grown rapidly over the past two years.

According to IPRdaily, applications related to underlying technologies such as access control, public key decryption, block construction and data processing accounted for about 50% of the total. The other half of the applications are mainly related to the application of blockchain technologies in various industries, such as identity authentication, drug tagging, food tracking, audit registration, financial institution information coordination, personal credit reporting and tax filing, and some other industrial applications.

Qudian Shares Slides to All-Time Low as Investors Sweat on Alipay Partnership-Yicai Global

What happened: Shares of Chinese micro-lender Qudian plunged to their lowest price since its listing over concerns that Ant Financial will not renew its strategic partnership with the cash loan lender when their deal ends this week. Qudian’s CFO said in an earnings call that the termination of the partnership is not expected to hurt the company’s business, but the market seemed unconvinced.

Why it’s important: The previous partnership with Ant Financial’s Alipay allows Qudian access to potential borrowers through the country’s largest third-party payment app. After the splashy IPO in October last year, the company soon come under fire as local media begun questioning the sustainability, validity and morality of their business. These scandals may contribute to Ant Financial’s decision to stop further partnership with Qudian. In response of the market fluctuations, the company defends that over 30% of its new browsers in the past eight months are acquired through Ant Financial partnership, but it only contributed a mere 2% of Qudian’s total transaction volume. The rest of more than 60% come from the platform.

Ant Financial IPO plans pushed back again – Financial Times

What happened: Ant Financial has decided to push back its IPO plans again due to financial hurdles and pressure from government’s recent crackdown on non-traditional financial institutions. The original expectations were that the company would file for an IPO sometime in this year, but people familiar with the matter were quoted as saying that a listing is unlikely before the end of 2019.

Why it’s important: The Alibaba affiliate was valued at $150 billion in its latest fundraising in June, which many investors thought paved the way for the highly-anticipated IPO. However, the company’s first-quarter earnings revealed that it has been reporting losses lately amid rivalry with the payment services of Tencent. Beijing has also been putting pressure on non-traditional financial institutions. Ant Financial, a privately-owned fintech company, has especially been under government’s close scrutiny.

Ant Financial has been secretly experimenting with blockchain technology applications. The Alibaba financial affiliate has sent out nearly 600,000 blockchain electronic medical bills to patients over the past two weeks,  according to Sina (in Chinese).

According to Ant Financial’s blockchain expert Yang Xueqing, the true value of blockchain medical e-bills is that it can prevent multiple reimbursement scams—re-submit a claim and be reimbursed multiple times. The difference between a blockchain e-bill and an ordinary one is that blockchain e-bills can keep a ledger of billing records that is trackable, irreversible and cannot be tampered with. Thus, it is able to reduce fraud cases like “double dipping” in medical billing. Blockchain e-billing is most suitable for use for high-frequency transactions like in medical billing.

Medical e-bill is just one of the applications of the consortium chain that Alibaba has been focusing on. As understood, the nodes on the blockchain network include hospitals, local finance bureau, social security bureau, information security solutions company Aisino Corporation, and Alipay.

Ant Financial is tapping into blockchain technology

Ant Financial considers blockchain technology as one of the five key technologies—Blockchain, AI, Security, IoT, and Computing (dubbed “BASIC”)—which will dominate every industry in the near future.

CEO Jing Xiandong previously at multiple occasions expressed his strong interest in blockchain-based fintech solutions. Jing said Ant Financial has been working on blockchain solutions with rigid demand—including tracing and tracking of charity donations, issuance payment, goods, tenancy agreement, and cross-border payments.

Ant Financial launched a blockchain-based cross-border remittance service in June, which is capable of sending money from Hong Kong to the Philippines in less 3 seconds. Ant financial said it is working with local partners to expand the service globally.

In June, the fintech giant raised $14 billion in what was said to be the biggest-ever single fundraising globally by a private company, which it said will be used to boost blockchain development.

Shanghai, Alibaba, and Ant Financial have signed a strategic cooperation agreement to boost the integrated development of the Yangtze River Delta. According to local media reports (in Chinese), under the new partnership agreement, Alibaba will ramp up its new retail efforts in Shanghai.

Alibaba founder Jack Ma revealed at the signing ceremony that Alibaba has been putting a heavy focus on the development of the Yangtze River Delta regions. Multiple Alibaba-owned businesses are headquartered in Shanghai, including O2O supermarket chain Hema Xiansheng and food delivery platform Ele.me. Alibaba’s mobile payment platform Alipay is also connected with Shanghai’s public service departments and is now capable of handling over a hundred civil affairs.

The company announced that it aims to bring new businesses, technology, products, and business models to Shanghai. It has selected the city as the location for Tmall’s global product launch. Alibaba also plans to boost O2O retail development and will put special focus on traditional retail and preserving age-old brands.

Alibaba’s financial affiliate Ant Financial also will accelerate the deployment of mobile payment network in Shanghai and will continue to support the annual Shanghai Shopping Festival as an official strategic partner. The fintech company also plans to help the city build an innovative financial center leveraging its blockchain and mobile payment capabilities. Ant Financial entered a strategic cooperation agreement with Shanghai Pudong Development Bank in May to support the bank’s digital transformation.

In July, regions in China’s Yangtze delta—including China’s financial hub Shanghai and manufacturing-focused Zhejiang and Jiangsu, and the province of Anhui—kicked off a three-year action plan to integrate their economies. The government has launched an RMB 100 billion fund to support technology development and others development efforts in the region.

The city of Shanghai and Alibaba Group’s tie-up dates back to 2015, and the e-commerce giant has been investing heavily in the city’s e-commerce, finance, technology, logistics and among other areas.

Ant Financial Service Group has recently raised $14 billion in what is believed to be the world’s largest-ever single fundraising. The company has gained attention from global media and capital markets. But the as the company offers a plethora of financial and mobile payment tools, one may ask, is it a financial company or a technology company?

At TechCrunch Hangzhou 2018, Hu Xi, Deputy CTO of Ant Financial and Partner of Alibaba group, spoke about Ant Financial and the company future plans for globalization.

Hu says that Ant Financial Service Group currently has about 63% of the technical personnel, which includes those in research and development, AI, algorithms, data, and key decision makers. Nearly 25% of the technical staff focuses on building fundamental infrastructure.

The company’s president and co-president who lead the company’s two global-facing business units that people are more familiar with—Alipay and Ant Financial—are both from the technical background. From this point of view, the company can be regarded as a technology-driven company, said Hu.

For example, “Double 11” (Singles’ Day), one of China’s largest online shopping festival, has brought on great challenges for the financial business and payment to provide users with reliable, sustainable, stable and secure shopping experience. It requires high-tech solutions to support 256,000 transactions per second, Hu explained. The team needs to figure out how to use big data and AI to solve this problem.

Hu also mentioned the Ant Financial’s loan services for small and micro businesses was initially a solution to provide loan services to buyers on Taobao. Eventually, the company used big data and AI algorithms to achieve something called the “310” model: 3 minutes to apply for credit, 1 second to approve, and 0 people involved in the decision.

Ant Financial Services Group expects to serve more than 1000 financial institutions in the next three to five years, and accelerate the pace of opening up all Ant Financial Services Group businesses including Ant Check Later and Yu’e Bao and so on. “Ant Financial Services Group’s first mission, vision, was to use technology to address inequality in this society,” said Hu Xi.

Ant Financial Services Group has been open to the outside world since 2015 and has gradually launched the Internet Propulsion Program. The company expects to serve more than 1000 financial institutions in the next three to five years. And accelerate the pace of Ant Financial Services Group including loans, micro-loans, and Yu’e Bao. In addition, they want to open up some of the traditional trade-related capabilities and risk-control AI capabilities.

“Ant Financial Services Group’s first mission and vision are to use the idea of technology to address inequality in society,” Hu Xi says.

What is the core capability of the financial industry in the field of digital finance?

• How to reach the users
• How to solve the risk problem in a better way
• The most important problem is the trust problem. The core ability of Ant Financial Services Group in financial aspects, including payment, wealth, insurance and small and microloans.
• Resolve trust, security, and reliability issues. Blockchain is the solution to this problem, so the first layout is blockchain technology.
• The company expects to serve 2 billion users in the next 5 to 10 years, but Ant Financial Services Group staff is less than 10, 000. From big data to AI, there needs to be a more efficient way to serve customers.
• Besides blockchain and AI, the capability at the core of financial services is security. How to provide customers with better safety wind control. The biggest challenge in the digital world is identification, which includes data privacy, encryption protection, and security.
• IoT—to better connect users and to link up the digital world and the real world. Transportation services and fare payment is also an area to tap into.
• Computing capability, not just cloud computing, but capable of providing financial computing capabilities, which should be trusted and reliable.

Serving 2 billion consumers

Ant Financial Services Group is expected to serve 2 billion consumers around the world. The biggest problem is: how to go overseas?

“A lot of people have mentioned blockchain-based remittance,” Hu said Ant Financial’s latest effort to expand overseas is the new blockchain-based cross-border remittance service that is capable of sending money from Hong Kong the o Philippines in less 3 seconds. Hu said Ant financial is working with local partners to expand their services globally.

“We have a strategy to win together with local partners. They have a good local financial license. The whole compliance process is very strict and formal, cooperating with them, giving them empowerment, forming a service mode. We hope to win together with our partners and give them the skills of technology,” Hu concluded.

Alibaba’s financial affiliate Ant Financial announced that it has entered into definitive agreements with investors for its Series C equity financing totaling approximately $14 billion, making a new world record for private fundraising.

Although the company did not disclose the valuation, a previous report from the  Wall Street Journal report suggested that the round could be raised at up to $150 billion mark. The current massive funding sparks more speculation about the company’s much-anticipated IPO.

This financing round includes an RMB tranche raised by Ant Financial mainly from existing domestic investors. A separate USD tranche is raised by its wholly owned offshore subsidiary Ant International from a group of leading global institutional investors such as GIC, Khazanah Nasional Berhad, Warburg Pincus, Canada Pension Plan Investment Board, Silver Lake, Temasek, General Atlantic.

Funds raised will be used to accelerate Alipay’s globalization plans and invest in developing technology. In addition, the capital will be used to cultivate high-tech talent in emerging markets to help communities take advantage of the opportunities arising from the digital transformation, according to an emailed announcement.

Eric Jing, Executive Chairman and CEO of Ant Financial, said, “We are pleased to welcome these investors as partners, who share our vision and mission, to embark on our journey to further promote inclusive finance globally and bring equal opportunities to the world. We are proud of, and inspired by, the transformation we have affected in the lives of ordinary people and small businesses over the past 14 years. Now, with the help of our partners, we are going to accelerate our strategy.”

In addition, will further emerging technologies such as blockchain, AI, security, IoT and computing capabilities.

Ant Financial has been pushing its globalization drive mainly through its core service Alipay, which is quickly finding footholds in India, Thailand, the Republic of Korea, the Philippines, Indonesia, Hong Kong, Malaysia, Pakistan and Bangladesh. In the year ended March 31, 2018, Alipay, together with its global partners, served approximately 870 million annual active users globally and over 15 million small businesses in China.

China’s Ministry of Science and Technology has announced the 2017 China Unicorn Enterprise Development Report (in Chinese) and the Zhongguancun Unicorn Enterprise Development Report. 164 companies have made the top unicorn list, with a total valuation of $628.4 billion. Ant Financial took the crown with a valuation at $75 billion. Didi Chuxing and Xiaomi were placed second and third with $56 billion and $46 billion valuation, respectively. Other unicorns in the top ten are Alibaba Cloud, Meituan-Dianping, CATL (宁德时代),  Jinri Toutiao, Cainiao, Lufax (陆金所), Jiedaibao, many of which had a big jump in valuation in the past year. iQiyi, Shenzhou Zhuanche, ofo, and many other big-name startups have also made the list.

To no surprise, most unicorns come one of the five categories: e-commerce, internet finance, health, culture and entertainment, and logistics. And over 84% of the unicorns come from Beijing, Shanghai, Hangzhou, and Shenzhen.

Alibaba invested in most unicorns in 2017 among Chinese tech behemoths with a total of 29 startups making the list, followed by Tencent (26), Xiaomi (12), Baidu (8) and JD.com (4).

Sequoia Capital invested in 35 unicorns last year thereby winning the title of 2017’s “Best unicorn investor.” IDG, Matrix Partners China, and Qiming Venture Partners have also invested in a number of unicorns.

There are also a couple of “former unicorns” who went public last year and have graduated from the list, including China’s first online-only insurer Zhong An Online Property and Casualty Insurance, China’s e-book seller Zhangyue, and financing and loan services Rong360.

Other honorable mentions are WeBank, Ping An Healthcare, and Technology—gearing up for an IPO this year—Koubei, JD Finance, Ele.me, and automakers including WM Motor and NIO are among those who have reached the $5 billion valuation mark.

E-commerce giant Alibaba announced today that it will invest an additional $2 billion in Lazada Group to accelerate the growth plans of Southeast Asia’s largest e-commerce platform and deepen its integration into the Alibaba ecosystem.

This accumulates Alibaba’s total investment in Lazada to $4 billion. Alibaba acquired 51% stake in Lazada in April 2016 with an investment of $1 billion and further increased its stake to 83% with another $1 billion investment in June 2017.

Launched in 2012, Lazada helps more than 145,000 local and international sellers as well as 3,000 brands serving the 560 million consumers in the region through its marketplace platform, offering a wide range of products in categories ranging from consumer electronics to household goods, toys, fashion, sports equipment, and groceries.

Along with funding also came a shuffle in management. Lucy Peng, who currently serves as Lazada’s Chairman and is a co-founder of Alibaba, will assume the additional role of chief executive officer. Lazada founder Max Bittner, who had been its chief executive officer since 2012, will assume the role of senior advisor to Alibaba Group and assist in the transition and future international growth strategies.

“With a young population, high mobile penetration and just 3% of the region’s retail sales currently conducted online, we feel very confident to double down on Southeast Asia. Lazada is well-positioned for the next phase of development of Internet-enabled commerce in this region, and we are excited about the incredible opportunities for super- charged growth,” said Peng.

“Alibaba’s new commitment of capital and resources is good for Lazada and good for the Southeast Asia e-commerce market. I am excited about the future for Lazada and Lazadians and I look forward to continuing to contribute to the success of the business by helping Lucy and Alibaba’s management,” said Bittner.

It’s not only the e-commerce part that Alibaba is interested in the burgeoning region. The tech behemoth had made significant investments in the area over the years. Alibaba Cloud announced this month that it has opened its first data center in Indonesia. In January, Alibaba Cloud launched Malaysia City Brain to help its city traffic, trade and also to grow local startups.

To celebrate National Tree Planting Day (植树节) on March 12, Ant Financial CEO Jing Xiandong said on March 11 that Ant Forest will invest RMB 500 million ($79 million) in ecological protection by the end of 2018, Chinese media TechWeb is reporting.

At present, there are more than 300 million Ant Forest users. If more than 300 million users continue their efforts for the next five years, Ant Forest says they will plant 500 million actual trees. This will be reforesting 6 million mu (90 hectares), or approximately equal to five times the land size of the New York City.

Launched in September 2017, Ant Forest is a feature in the Alipay app. Users can grow a virtual tree by doing environmentally friendly things such as walking, using public transportation, asking for electronic invoice rather than paper invoice, and recording their own carbon emissions. After the virtual tree is fully grown, Ant Financial matches the user with charity partners such as the China Green Foundation, Elion Foundation, SEE Conversation, and The Paradise International Foundation so that they can plant a real tree.

When users open Alipay app, they can click “Ant Forest” banner to access their virtual tree. At the bottom of the tree, there are a ranking of friends based on their saved carbon emission shown in kg.

By the end of 2017, Ant Forest had accumulated and maintained 13.14 million real trees and guarded 12111 mu or 181,665 hectares of protected land, which were located in Alashan, Ordos and Bayan Nur in Inner Mongolia, and Wuwei area in Gansu province.

Ant Forest users can access satellite imagery to see the changes made by the reforesting and the newly planted saplings forming a row of sloping lines.

According to the plan announced by the State Forestry Administration, China’s large-scale land-based greening efforts will strive to complete afforestation by 1.5 billion hectares in 2018. Ant Forest said that they will participate in planting 15 million hectares of forestry each year, which is equivalent to 1% of the domestic forest land.

Shoppers can now use Alipay in all of mainland China’s 41 Apple retail stores, the first time a third-party payment system has been accepted by the firm in store. The Alipay app now has a new section where users can link their Apple accounts to their Alipay account and find special offers for spending in physical Apple stores.

Apple has seen mixed success in China. Its products are doing well, its mobile payment system Apple Pay less so. The country is Apple’s second largest retail market after the US and sales have grown for the last two quarters, an increase of 11% in its combined fiscal first-quarter revenue (which includes Taiwan and Hong Kong) to a record $17.9 billion. Much of this comes from demand for the iPhone.

Adding Alipay as a payment option in store is in line with making sales as convenient as possible for shoppers. WeChat Pay is on a trajectory to surpass Alipay in terms of total transaction volume, though shoppers have a tendency to use Alipay for larger purchases (Apple products, for example) and WeChat for day-to-day shopping such as groceries and convenience stores.

Despite there being an estimated 243 million iPhone users in China as of July 2017, the take-up of Apple Pay has been limited. Shoppers were already firmly in the habit of using Alipay and then WeChat Pay via QR codes, leaving little space for Apple and its NFC approach, despite (or because of) some unusual promotions.

A report by Bloomberg found that only 1% of one Chinese bank’s 10 million online banking customers had even activated the service. Even in Apple’s homeland of the US only 13% of users were thought to have tried the service by April 2017 and it is believed to have peaked in March 2016.

Ant Financial’s Alipay has been available as a payment method in Apple’s App Store since November 2016. Tencent’s WeChat Pay is also an option for making app store payments. Alipay users with Apple IDs linked to the China App Store can now bind the two accounts with a newly-created area with the Alipay app (we had to do a search to find this). According to Ant Financial, those who activate the function will be able to make payments in the App Store with Alipay and receive offers for spending in Apple Stores with Alipay.

Apple has yet to make any comment on the move though we thought our readers may find its most recent retail announcement of interest: Apple’s first ever store in South Korea opened on January 27, 2018.

Ant Financial’s money market fund Yu’e Bao (余额宝) is putting a cap on daily subscription volume starting today (February 1st) said Tianhong Asset Management, the firm that manages the fund.

The fund manager released an announcement yesterday that reads: “From February 1^st to March 15^th, 2018, Tianhong Asset Management will adjust the rules, putting a cap on daily subscription volume…”

During the said time period, effective today, Yu’e Bao starts accepting subscription at 9 am every morning and stops issuing subscription when the daily cap is reached. According to the announcement, daily volume cap will be adjusted according to the number of subscriptions, redemptions, and other conditions.  The automatic inward transfer service will also be temporarily suspended during this time. However, other features on the platform are not affected by the adjustment.

According to Tianhong, the main purpose is to ensure the fund’s smooth operation and “prevent the fund from growing too rapidly.” Tianhong’s official figures show that Yu‘e Bao’s assets have reached an estimated of RMB 1.4 trillion, accounting for roughly 28% of China’s money market funds.

Set up in June 2013, Yu‘e Bao is now one of the world’s biggest money market funds and is integrated into Ant Financial’s payment app Alipay.

There have been multiple caps placed on subscription volume and investment amount in 2017 alone. The most recent cap was imposed last December, which Ant Financial capped the amount of daily investment at RMB 20,000. However, it has been rumored that most users are not affected by restriction since investors on Yu’e Bao invest an average of less than RMB 4000 in the fund.

Ant Financial Services Group today announced that Alipay is soon to be made available to most local businesses in the Swiss town of Davos, thanks to a partnership with SIX Payment Services, a pan-Europe payment service provider based in Switzerland. Restaurants, bars, supermarkets and hotels in Davos will be offering Alipay, all with merchant information available in Alipay’s in-app overseas traveller service platform.

Alipay, along with its arch-rival WeChat Pay, has aggressively expanded globally in recent years. Data from research institution iResearch shows that the value of China’s mobile payments market tripled to more than RMB 38.5 trillion ($5.6 trillion) in 2016 and is projected to reach RMB 55 trillion in 2017. Comparing the marketshare, Alipay accounted for over 80 per cent of transaction value just three years ago, however, it held a 54 per cent share of mobile transactions by value, while WeChat Pay claimed 40 per cent, in the first quarter of 2017.

With around 40 flights between the two countries every week, China has become the fourth largest source of tourists to Switzerland and the two nations experienced over 1.2 million two-way visits between China and Switzerland in 2017, up 12% year-on-year. Holiday is the peak season, as Alipay overseas transaction grew by eight times over National Holiday Golden Week in 2017.

“Alipay is committed to better connecting Chinese tourists abroad with local merchants. We help businesses to share customised service offerings that cater to the needs of Chinese tourists,” said Eric Jing, CEO of Ant Financial.

SIX Payment Services currently supports bank card transactions via Point of Sale (POS) systems at over 250 merchants in Davos. With the new agreement in place, these Swiss merchants will soon be able to serve Chinese tourists by offering e-payments in RMB via Alipay.

A mini program found in the Alipay app, the lead payments app run by Alibaba affiliate Ant Financial, has attracted 40,000 car owners in its first 10 days. It tackles the now typically Chinese problem of parking chaos with the typically modern Chinese QR code.

The applet called MoveCar (or 码上挪车 Ma Shang Nuo Che which translates roughly as “shift a car with a code” but including a pun on “mashang” meaning “immediately”) lets users create a pass with a QR code printed on it. The driver can then display the card somewhere inside the vehicle so that should someone want to contact the owner–for example if the car is blocking them in or is parked across their front door or side street–they simply scan the QR code. This allows the owner to anonymize his or her contact details and provides a way for others to anonymously send an SMS or call the owner to negotiate.

Currently the usual way is for car owners to write their mobile number on a form typically provided for free as a promotional item. However this presents the problem of giving away private information: the owner’s number plate as well as car license number.

Developed by Hangzhou Chasing Technology which operates the Qi Che Da Sheng app (齐车大圣, betraying the company’s fondness for puns) that helps car owners manage and fix their cars, the mini program has already acquired 40,000 users according to reports in local media (in Chinese). 10,000 have opted to have cards printed and mailed to them and the other 30,000 have chosen the option for printing the signs themselves.

It is too soon to say whether what effect it might have on parking etiquette.

The Hurun Research Institute released today the Hurun Greater China Unicorn Index 2017, where Ant Financial, Didi Chuxing, and Xiaomi top the chart. The report listed out 120 best unicorns in the Greater China region that are valued over $1 billion as of the end of November 2017.

“We select the companies valued over $1 billion based on the initial definition of a unicorn startup. However, for many investors nowadays, only those valued over $10 billion or over $15 billion are considered unicorns,” says Rupert Hoogewerf, chairman of Hurun Report, in a statement.

It’s worth noting that Beijing accommodates the most unicorn startups, holding up 45% of the companies on the list, followed by Shanghai, Hangzhou, and Shenzhen. Among the selected companies, 17 of them are from the internet finance industry with valuations totaling RMB 700 billion (roughly $106.5 billion).

On top of that, the list also sees a slew of startups from the internet service and e-commerce sectors, both of which account for 18% of all the listed companies. Startups from the entertainment, transportation, and health sector are active as well.

Also, among the top 10 unicorns, eight of them are valued over RMB 8 billion ($12 billion). Sequoia Capital, on the other hand, became the venture capital that invested in the most unicorns, followed by Tencent and MatrixPartners China.

On the list, Ant Financial, Didi Chuxing, and Xiaomi are named the top three unicorns with valuations respectively at RMB 400 billion ($60.84 billion), RMB 300 billion ($45.63 billion), and RMB 200 billion ($30.42 billion). The other unicorns include China Internet Plus, Toutiao, CATL, Lufax, DJI, Koubei, Cainiao, JD Finance, and Ele.me.

Alibaba’s financial affiliate Ant Financial Holdings announced Monday the signing of a Memorandum of Understanding with Standard Chartered Bank.

“Under the terms of the MOU, Standard Chartered Bank will combine its banking expertise and insights in emerging markets with Ant Financial’s industry leading financial tech capabilities, to increase access to financial services for clients based in countries along the “Belt & Road Initiative” route,” according to an official statement.

The partnership marked another milestone in Ant Financial’s globalization drive.  The firm’s leading third-party payment and lifestyle platform, Alipay, has more than 520 million active users, working with over 450 financial institutions and providing in-store payment services for Chinese tourists in more than 30 countries and regions.

Through decade-long development, Ant Financial empowers its strategic partners in emerging markets, including India, Thailand, the Philippines, Indonesia, Korea and Malaysia, to provide inclusive financial services, such as e-wallet solutions for local populations.

After establishing a foothold in Asian markets, the new partnership would accelerate the group’s efforts in penetrating more markets around the world, which is in line with the government’s Belt & Road plan. The MOU was signed following the 9th UK-China Economic and Financial Dialogue, which was held from December 15 to 16 in Beijing, China.

“We are excited about the opportunity to further collaborate with Standard Chartered Bank,” said Eric Jing, Chief Executive Officer, Ant Financial Services Group. “With the mission to ‘bring the world equal opportunities’, Ant Financial is dedicated to using technology to make financial services more inclusive on a global scale. This MOU with SCB is an important milestone in our efforts to enable our partners to better service their clients around the world.”

Standard Chartered Bank has been working together with Ant Financial since 2012, in areas including funding settlement, FX services and Alipay wallet related solutions. Their tie-up has helped Alipay to extended its service to Hong Kong early this year.

On this year’s Singles’ day, Alibaba’s total GMV exceeded RMB 168.2 billion (more than $25.3 billion), and a whopping 812 million delivery orders were made, with 90% of the GMV coming from mobile. During the 24 hours, 1.48 billion payment transactions were processed, with a 41% YoY growth.

“On November 11, 167 merchants surpassed RMB 100 million in sales, 17 merchants surpassed RMB 500 million in sales, and 6 merchants surpassed RMB 1 billion in sales,” Daniel Zhang, CEO of Alibaba Group remarked.

While this year’s sale day smashed last year’s records, now the new goal for Alibaba is globalization. This year’s sales event showed clearly how Alibaba’s shopping festival is gradually converging China and the rest of the world. Alibaba reported that 225 countries and regions with completed transactions.

Here are some of the highlights:

• Top 5 countries selling cross-border to China by GMV were Japan, United States, Australia, Germany, and South Korea.
• Top 5 imported brands bought by Chinese consumers by GMV were Swisse, Aptamil (爱他美), Kao / Merries (花王／妙而舒), Moony and Bio Island.
• Top 5 countries/regions buying cross-border from China by GMV were Russia, Hong Kong, United States, Taiwan and Australia.
• Top 5 export product categories from China by GMV were mobile phones, wool coats, knitted sweaters, dresses, and sweaters.

Alibaba’s online finance arm, Ant Financial announced that Alipay processed around 256,000 payment transactions per second at its peak within the first 10 minutes of the shopping festival. This was made possible by Ant Financial’s proprietary finance-grade distributed relational database, OceanBase, which processed 42 million requests per second at its peak. The company also reported that a total of 1.48 billion transactions were processed by Alipay in the entire 24 hours and Alipay processed 100 million transactions in the first 7 minutes 23 seconds of the shopping festival.

Alibaba’s financial affiliate Ant Financial is adding new fuel to the quick rise of automated stores in China this Tuesday by opening its unmanned technologies to merchants.

The Alipay solutions will enable automated customer ID authentication, risk control, payment, and clearance, allowing customers to enjoy service provided by merchants without the help of their staff. The same technology has been applied to Tao Café, Alibaba’s cashier-less coffee shop driven by computer vision and sensor technologies. “The matured fraction of our IoT payment solutions is open to the merchants this time,” introduced Jiang Kui, an Ant Financial executive.

Ant Financial expects its technology to have wider applications in all kinds of scenarios such as unmanned sales stands, mini karaoke kiosks, fitness rooms, working spaces, and more. But for the time being, the solution only applies to single-user scenarios rather than more complex cases where multiple users can be identified at the same time.

As much as it may sound like another threat from automation to human labor, the adoption of this technology would not cause huge layoffs, but rather create more business opportunities, according to the company. “The 24/7 service model would create business and job opportunities for industries along the industrial chain, from information processing to sensor manufacturing,” said economist Pan Linhe.

Mao Daqing, CEO of URWork, has dropped hints earlier this month that the co-working unicorn is working with Alibaba to adopt AI in office management. The current news reveals that URWork is among the first offline clients to adopt Ant Financial’s unstaffed solution in its shared spaces. Users can unlock doors, book conference rooms, or use fitness rooms by scanning with their Alipay app.

Ant Financial, the financial services affiliate of Alibaba, has made a strategic investment in VFinance (维金), a Shanghai-based startup providing digital financial infrastructure solutions to enterprises in China, according to VFinance’s announcement.

At a press conference on July 18th, VFinance also signed strategic cooperation with MyBank (网商银行), an online bank launched by Ant Financial in 2015. The cooperation includes payment and settlement, financing financial products, industry investment and financing solutions, technical personnel team structures to help SMEs who struggle to fit into the financial bracket for loans and services.

The creation of VFinance originated from founder Yu Qianghua’s personal experience in a bank. The communication process at the bank counter and with the staff was not so pleasant. He realized that there needs to be a special financial channel for the most productive people and enterprises, and founded VFinance. Its VFinance Wallet allows enterprise customers to conduct transactions via third-party payment services including WeChat, UnionPay, and Alipay.

Mr. Yu and his core team have more than 10 years of industry-wide R&D and operational experience. For more than three years, VFinance has served more than 60 customers, including Huochebang (货车帮, truck helper) who provides cargo sharing platform, tourism company 8trip (八爪鱼在线旅游, Octopus’s online trip) and Souche (大搜车, search car) who provides second hand car trading platform, and other companies in real estate, home improvement, retail, and electricity sector.

Founded in 2013, VFinace pocketed Series A financing from IDG Partners in 2014, followed by IDG  and  Yunqi Partner’s injection to Series A+ of financing. At the end of 2016, the company received series B financing from Ant Financial.

Bike rental platform ofo announced the completion of more than $700 million series E financing on July 6th. The current round of financing was jointly led by Chinese eCommerce giant Alibaba, Hony Capital and CITICPE, followed by existing investors Didi Chuxing and DST, with China eCapital as the financial adviser of the current financing.

Alibaba investment in ofo is quite worthy of attention. Prior to the new funding round, ofo had already struck a strategic cooperation deal on April 22nd with Sesame Credit, the social credit scoring system developed by Ant Financial, allowing Shanghai ofo users with a Sesame Credit score of 650 or higher to register on the app without making the RMB 99 deposit. This is considered an important sign of Alibaba’s entry into ofo.

Ofo’s founder and CEO Dai Wei said: “Ofo is committed to providing users with convenient, efficient, green and healthy travel services to the world. In the future, we will further promote the user experience upgrade, accelerate the strategic layout at home and abroad.”

Alibaba as the leading investor in the current round was very optimistic about the future development prospects of ofo. Alibaba Group Executive Vice Chairman Cai Chongxin said: “Ofo redefines the short-distance travel so that more people can join the low-carbon life, and deliver a real positive value to the community. We are delighted to be working with ofo to unlock the industry’s greater potential.”

Fintech needs to be less about the technology and more about solving real problems in the next couple of years. The sector is proving more disruptive in Asia than elsewhere around the world, according to the panelists for “2017 – A better year for fintech?” session at TechCrunch Shenzhen.

Jack Zhang, co-founder and CEO of cross-border payments platform Airwallex, and James Lloyd, Asia Pacific Fintech Leader at professional services firm EY (formerly Ernst & Young), were unanimous in their outlook for fintech.

“Less hype around [fintech] funding and more real new products,” said Lloyd with Zhang of the similar opinion that “. . . [i]t needs to be about how we’re solving problems, not just talking about tech like blockchain. It has its uses, but isn’t necessarily solving problems.”

But that’s the future.  We are now seeing non-traditional finance firms in China becoming to ones pushing outbound expansion, said Lloyd.

“It’s difficult to see anyone else building a retail proposition in mainland China than can challenge [Alibaba and Tencent],” said Lloyd, “They’ve been incredibly smart about how they’ve maintained their foothold in other areas such as bike sharing.”

China’s payment providers are pushing outwards regionally and globally, whether they identify as fintech companies or provide services as part of a broader offering, such as Grab, said Lloyd. With the arrival or these services which provide a “. . . cheap, efficient way to get merchant acceptance in places like Indonesia… [these countries] will jump straight past European and American style credit card systems. The West is now learning from Asia,” said Lloyd.

When it comes to inbound expansion into China, foreign financial institutions or fintech companies, “You need a very strong connected local player to come into China, that will turn out to be one of these guys [Tencent or Alibaba],” said Lloyd who also said he was skeptical of any outsiders still trying to “parachute into China.”

Asian Disruption

China’s fintech companies have had to innovate to survive. Platforms adopted the QR code as a way to enable payments not because it was the best thing to do, but because of the constraints of not being able to use existing networks such as UnionPay and lack of penetration of NFC technology, according to Lloyd, who added: “Optimal solutions aren’t always the most successful solutions.”

Fintech outfits in China are proving increasingly disruptive towards Asia’s financial sector. “The vast majority of fintechs are enabling technologies for banks,” said Lloyd, but that “In China you have scale disrupters such as Ant Financial. In Asia we’re seeing more disruption than in Europe and the US.”

Airwallex, which recently secured $13million of funding led by Tencent and included MasterCard, is “on track to work with WeChat” for international payments, said Zhang, but that for Australia-based Airwallex itself, “. . .[a]t the end of the day, you still have a bank account unless you get a banking license, so it’s quite obvious to us that we have to work with banks. So we find the most digitally-savvy bank in each country.”

Their service is aimed at businesses rather than individuals. They connect banks’ APIs to create a system that is faster and cheaper than the existing SWIFT network and also allows a lot more data to accompany, and be generated by, the money flows. This makes it much more trackable, which is proving more disruptive in Asia than in Europe and America; it is the first player in Asia Pacific, Europe, and America with many of the new generation of international payment providers such as TransferWise and Solaris predominantly been focused on individuals.

“Our proposition is not to aggressively find more clients – we can’t at the moment,” said Zhang of Airwallex’s growing success.

One further reason why the disruption may continue to be greater in Asia’s financial market than elsewhere is regulation. China’s tech giants have diversified into fintech, such as the Alibaba to Alipay to Ant Financial route. “Surely we can expect the same [move into fintech] from Facebook and Google? No. They’re already under pressure for their dominant market positions,” explained Lloyd.

The funding spree continues in China’s bike-rental sector. Bike-rental startup ofo announced over the weekend that it raised an undisclosed amount in its Series D+ from Alibaba’s financial arm Ant Financial.

Under the deal, ofo cooperate with Ant Financial in the fields of e-payment, credit system and globalization process.

The announcement came less than two months after the bike-rental startup secured a US$450 million series D in March, which the company said was the largest amount in a single funding round in the sector.

Prior to the new funding round, ofo had already struck a strategic cooperation deal last month with Sesame Credit, the social credit scoring system developed by Ant Financial, allowing Shanghai ofo users with a Sesame Credit score of 650 or higher can register on the app without making the RMB 99 deposit.

Ant Financial CEO Jing Xiandong said the company will set an example for the bike-rental sector through this cooperation with ofo, and fully unleash their potential in the mobile platform, credit management, online payment, risk management and safety control.

It is no wonder ofo chooses to team up with Ant Financial, which is the operator of Alipay and other Alibaba-backed financial services, while ofo’s arch rival Mobike has worked closely with WeChat (Mobike’s bike-rental feature was added to WeChat Wallet last month). In China’s third-party online payment, Alipay and WeChat Payment remain the top two players, each with a 54.1% and 37.02% share in the fourth quarter of 2016.

Dai Wei earlier revealed the company is worth US$ 2 billion, takes in over RMB 10 million in revenue a day, and will hopefully turn a profit this year.

Ant Financial, the financial affiliate of Chinese e-commerce giant Alibaba, announced on Wednesday a strategic partnership with Indonesia’s second largest media firm Elang Mahkota Teknologi (Emtek), in its latest efforts to expand its presence in overseas mobile payment market, local media is reporting (in Chinese).

Under the agreement, the two parties will set up a joint venture company to develop mobile payment solutions and provide digital financial service for the users in Indonesia.

Emtek is a leading media and Internet company in Indonesia, with its operation ranging from national TV stations to film and TV production and C2C e-commerce platforms.

Ant Financial was lured by the growth potential of the Indonesian market whose smartphone user population has topped 100 million, ranking fourth in the world.

Ant Financial is replicating and creating its success in mobile payment outside its home turf. Since the end of last year, the firm has sped up its expansion abroad, especially in southeast Asia, where the e-commerce market there was estimated at US$5.5 billion in 2015 and US$87.78 billion by 2025.

The firm has been in search of new engines of growth as the domestic market is starting to mature after white-hot development, with a focus on cross-border offline payment business and inclusive finance services (financial services for individuals and small and micro-sized businesses).

It announced in February a US$ 200 million investment in South Korea’s Kakao Pay, and also clinched deals with Philippines’ fintech service Mynt and Thailand’s payment firm Ascend Money.

Ant Financial and Emtek plan to launch a payment platform on the BlackBerry social messaging system (BBM), which has gathered 63 million monthly active users in Indonesia. BBM, claiming itself to be the most popular messaging app in the country, has been operated by Emtek’s unit since Emtek partnered with Blackberry last June.

Ant Financial’s tie-up with Emtek may pose a threat to Chinese internet giant Tencent, which has made its own expansion initiatives as well. Tencent teamed up with Indonesia’s largest media firm PTGlobal Media com in February 2013, to cash in on the booming social media market there. Tencent’s WeChat has reportedly become the fourth (in Chinese) popular messaging service in Indonesia in 2014, according to Andi Ardiansyah, consul of Indonesian Consulate General in Guangzhou, in an interview.

Ant Fortune, the investing app of Ant Financial Services Group (Alibaba Group’s finance affiliate), unveiled recently Caifu Hao (财富号 or “Fortune Account” in English) which will allow third-party financial institutions to set up shop inside the app.

The app currently works as a retailer that features and sells selected financial products from its sister companies or third-party financial institutions. With Caifu Hao, third parties will be able to sell their own products to users directly and publish content on the app. The admin dashboard for Caifu Hao owners provides data analysis and customer relation management tools. Ant Fortune will also help push their products to targeted users, according to the company.

The Caifu Hao system is expected to go live in June and the first batch will include several mutual fund companies. It will later open to various financial institutions including banks, insurance companies, and securities firms, according to Ant Financial.

With such a system, Ant Fortune will be able to transform into a business-to-customer marketplace. Currently it’s unclear how Ant Fortune will charge financial institutions. Zhao Cai Bao, another platform of Ant Financial, charges businesses commission fees. Alibaba Group’s e-commerce marketplaces, unlike many others around the world, make the majority of their revenues through advertising offerings instead of commissions or other business-facing fees.

The Ant Fortune app provides so far Yu’e Bao, the money market fund from a mutual fund company majority-owned by Alibaba Group, and Zhao Cai Bao, wholly owned by Ant Financial that offers fixed term deposit products from third-party financial institutions or individuals, mutual funds, and stock market information.

Launched in August 2015, the app has had 35 million customers (excluding Yu’e Bao customers) and has accumulated 180 million visitors. Its offerings are from some 200 financial institutions, with some 100 being mutual fund companies. 86% of its users are post-80’s, who were born after 1980, with 35% born after 1990.

The in-app storefront system, allowing store owners to develop customized features and take payments through major online payment services, has become a must-have for big Chinese mobile apps, no matter how different their core offerings are. Ant Financial’s own Alipay app, which provides a wide variety of payments and other mobile services, also has such a channel for businesses. Since 2014, WeChat, China’s most popular mobile messaging app, has got tens of millions of businesses and other organizations using its Official Account system to publish posts or even sell goods. For both WeChat and Ant Financial, such systems can also boost the usage of their respective mobile payment services.

But operating an online financial products market may be more difficult especially given that China’s financial market is heavily regulated. Shortly after WeChat launched Mini Program, web-based application that runs inside the WeChat system, in early this year, financial institutions were asked to remove the account opening and purchase capabilities of their mini-apps as per request from China Securities Regulatory Commission on security concern (in Chinese). It’s unknown whether Caifu Hao will encounter similar problems.

Ant Financial revamped and relaunched its open platform in August 2016. After Caifu Hao, more open programs will be launched later this year, according to the company.

Hurun Report released the Hurun Global self-made women billionaires list, a ranking of the self-made women billionaires found in the world on International Women’s Day, 8 March 2017.

“There can be no question anymore that China is the best place in the world to be a woman entrepreneur. The question I am often asked is ‘Why is China producing so many of the world’s most successful women in business?’ There is no Chinese in the Top 10 of the world’s self-made billionaire men, yet 6 of the Top 10 world’s self-made women billionaires are from China,” said Rupert Hoogewerf, Chairman and Chief Researcher of Hurun Report.

“The one-child policy coupled with traditional childcare, whereby grandparents often play a much larger role in bringing up the children than in developed countries, is perhaps a reason. Another is the business boom this generation has enjoyed in China.”

Here are the top 6 self-made women entrepreneurs in China’s tech scene:

Zhou Qunfei

Place in list: 2nd

Net worth: US$ 6 billion

Company: Lens Technology

‘Touchscreen Queen’ Zhou Qunfei was the richest self-made women in the world in 2015, after her company went public. Zhou Qunfei was born in Hunan Province and worked as a factory worker. As the mobile phone era came, Zhou helped Motorola develop a glass screen for their new device, and later received orders from HTC, Nokia, and Samsung. By 2015, Apple and Samsung were her two biggest customers.

Zhang Xin

Place in list: 17th

Net worth: US$ 3.1 billion

Company: SOHO China

Zhang Xin and her husband Pan Shiyi run real estate developer SOHO China, which is listed on the Hong Kong Stock Exchange and owns office towers in Shanghai and Beijing. In 2014, Soho China launched co-working space “SOHO 3Q” and is renting out more than 13,000 desks. Pan Shiyi is Soho China chairman, while Zhang is CEO. The Beijing residents founded the SOHO China Foundation in 2005 as a philanthropic organization to engage in education focused initiatives to alleviate poverty.

Ma Dongmin

Place in list: 20th

Net worth: US$ 2.9 billion

Company: Baidu

In 2017, Ma Dongmin (Melissa Ma), the wife of Baidu’s CEO Robin Li returned as a special assistant in Baidu, responsible for Baidu’s investment, human resources, and finance (Chinese source).

When calculating the wealth of the women billionaires, Hurun only counted wealth that can be independently verified in their name. In the case of Robin Li and Ma Dongmin of Baidu, Hurun has valued her independently based on her individual shareholding.

Wu Yan

Place in list: 236th

Net worth: US$ 1.9 billion

Company: Lens Technology Hakim

Hangzhou-based ‘media & entertainment queen’ Wu Yan is, at 36-year-old, the youngest self-made billionaire. She is currently chairman of Hakim Unique Media Group. In 2012, Hakim shares (later changed to Hakim Unique) listed on the Shenzhen stock exchange, which led Wu Yan to become China’s youngest female chairman. Founded in 2001, Hakim is now the leading service provider of smart city solutions and has been recognized as the National top 10 IT service provider and National Top 10 Enterprise in Intelligent Building Industry.

Chen Xiaoying

Place in list: 41st

Net worth: US$ 1.7 billion

Company: STO Express

Chen Xiaoying is sister to Chen Dejun, Chairman of STO Express. Founded in 1993, Shentong (STO) Express is a Chinese delivery firm based in Shanghai, delivering one in six parcels in China. Its major competitors include ZTO Express, SF Express, and Shanghai YTO Express.

Peng Lei

Place in list: 58th

Net worth: US$ 1.4 billion

Company: Ant Financial

Peng Lei (Lucy Peng), a co-founder of Alibaba established the online financial services company in 2014 to cater to small businesses. Peng became a billionaire in 2014 upon Alibaba’s valuation prior to its record-setting IPO. Peng previously taught at the Zhejiang University of Finance and Economics for five years. She quit teaching after marrying, and with her husband joined Jack Ma in founding Alibaba in September 1999.

Other interesting details

• TMT has the most number of self-made women billionaires with 13, followed by Manufacturing and Retail with 11 billionaires each. The main difference with the Hurun Global Rich List 2017, was that Investment came in third above Real Estate.
• Among 88 billionaires from 12 countries, China has the most number of self-made women billionaires with 56, followed by the USA with 15.
• Average wealth US$2.2bn, up 11%; Average age 57 years, seven years younger than those on the Hurun Global Rich List.
• 67% derived wealth from publicly listed companies.
• Top three cities in the world for self-made women billionaires are all in China, led by Beijing with 10 billionaires, followed by Shanghai, Shenzhen, and Hangzhou.

Ant Financial, the financial affiliate of Chinese e-commerce giant Alibaba, announced today a US$ 200 million investment in Kakao Pay, the soon-to-launch mobile finance subsidiary of Kakao Corp, parent to South Korea’s leading mobile messaging platform Kakao Talk.

Kakao, which now claims 48+ million users, has launched its mobile payment feature Kakao Pay last year. The platform has accumulated more than 14 million members and gradually evolved from payment transactions to offer innovative and convenient mobile financial services including bill payment, remittance and membership management.

Kakao’s board decided in January to form a separate entity for its Kakao Pay financial service brand, tentatively named Kakao Pay Corp. Young-Joon Ryu, who currently leads Kakao’s fintech division, will head the new company.

Under the agreement, Ant Financial, operator of China’s ubiquitous mobile payment tool Alipay which claimed 450 million users, will offer its wide range of digital financial services through Kakao Pay in South Korea. The new company will increase the number of online and offline merchants by merging Alipay’s 34,000 merchants into Kakao Pay’s system, providing merchants a much larger customer base, according to the company statement.

The partnership would be a win-win cooperation between the two parties as Kakao Pay can gain access to Alipay’s existing online and offline resources and technological support, while Alipay can leverage on Kakao’s huge user base to enter the Korean market.

While leading the domestic mobile purchase transformation, Ant Financial is also taking aggressive steps in overseas expansion through partnerships with local players. Alipay has been supported widely both online and offline in Japan, Korea, and Europe.

Investment is another major channel for the Chinese firm to penetrate overseas markets. Alibaba announced an undisclosed investment into payments service Mynt, a unit of Philippine telco Globe Telecom. It has acquired a 20% stake in Thailand’s third-party payment company Ascend Money last year and has invested in Indian’s PayTM in 2015.

As service first boomed in China, it’s natural for Alipay to take overseas payment made by Chinese users – whether made online or on a vacation abroad, as their first frontier when tapping overseas markets. The company noted that Chinese visitors and tourists will continue to enjoy a broader payment experience in South Korea with Alipay, and also Kakao Pay users will enjoy more digital financial services provided by the growing global footprint of Ant Financial.

On the other hand, the tie-up will benefit Kakao Pay which is facing a crowded local market with competition from Naver Pay (operated by South Korea’s top search engine), Samsung Pay, and retail giant Lotte Group’s L Pay.

“South Korea is an important market for Ant Financial in its global expansion, and we see many opportunities in the market for innovative services and growth in mobile payments. Given Kakao’s leading mobile platform offering and vast customer base, we believe we can bring Ant Financial’s broad experience in digital payments and technology-driven financial services to offer exciting and innovative products to South Korean customers,” said Douglas Feagin, President of Ant Financial International.

After a dry spell for tech IPOs in 2016, we are recording a good beginning for a new year with brightening IPO market globally. Snapchat is expected to set a new record for tech IPOs at a 25 billion USD valuation, while a raft of anticipated listings from uprising startups are in the pipeline.

As market prospects soar, Chinese tech companies are also poised to win back investors hearts. Here’s a list of IPO candidates from China in this year.

Ant Financial

Ant Financial, the operator of China’s most popular mobile payment tool Alipay and other financial services, was founded in December 2014 when it was spun out of Alibaba before the latter’s record IPO in September 2014.

As the most valuable spin-off of the e-commerce giant, Ant Financial has completed a 4.5 billion USD round at a valuation of 60 USD billion.

The company has been on the rumored IPO list for years and it seems that the company is in no hurry for the IPO as it’s putting its focus on business growth and user acquisition. But 2017 is definitely on the radar, especially for late 2017.

In preparation to the IPO, Ant Financial reshuffled its top leaders last year. The company is likely to get listed in mainland China and Hong Kong.

Kuaishou

Kuaishou might be a lesser-known name for users outside of China, but the 3 billion USD video clip and photo editing and sharing app, is hugely popular in the Middle Kingdom, especially in low-tier cities and towns, in the wake of China’s video and photo sharing boom.

The app has recorded its first surge since the beginning of last year, with traffic consumption topping that of Weibo and WeChat, the two biggest mobile apps in the Chinese market.

Currently, Kuaishou claims over 400 million registered users. TechCrunch citing sources that the firm has amassed more than 40 million DAU against 100 million MAU. The same source disclosed that Kuaishou is planning to go public in the U.S. in the later half of this year.

The company is venture backed by Sequoia Capital, DST, Baidu, and DCM.

China Reading

Backed by Chinese internet titan Tencent, China Reading, aka Yuewen Group, is China’s biggest online publishing and e-book company. Born out of a merger of Tencent Literature and Shanda Cloudary in 2015, the platform claimed some 600 million registered readers across its nine e-reading platforms like QQ Reader and Qidian.

Reuters reported that the company plans to raise up to $800 million in a Hong Kong IPO in 2017.

Qudian

Founded just two years ago, online microlender Qudian rose to prominence on the back of its student loan service Qufenqi, which allows college students and young white-collar workers to purchase smartphones, laptops and other consumer electronics with monthly installments.

The Ant Financial-backed startup is looking to an offshore IPO in Q1 this year to raise more than 500 million USD, local media Caixin reported.

Editor’s note: This post was contributed by Jx Tan, Countly Analytics’ Chief Growth Officer (China & APAC). Founded in 2012, Countly’s Open Source framework represents a new category of collaborative technology that answers difficult questions like for innovative companies like Atom Bank based on their users’ in-app behavior and crash data. 

China’s internet finance industry is booming. The country leads the world when it comes to total users and market size; financial-technology (or fintech) start-ups are mushrooming, as are company valuations; capital markets are aggressively pursuing the Internet finance industry, and consumer behavior is changing dramatically. By the end of 2015, the market size of the country’s Internet finance sector was more than 12 trillion renminbi ($1.8 trillion), dominated by the payments sector.

I spoke with Chris Skinner, a UK-based commentator on financial markets and author of Digital Bank and Value Web, about the unique opportunities for China’s fast-moving fintech industry, international fintech trends, and how traditional banks & fintech start-ups are exploring new ways to work together.

What are the noteworthy opportunities you see in Chinese fintech?

First of all, we need to acknowledge that China and fintech is starting from a very different position relative to American and Europe who had technology applied to finance for over 60 years. Whereas to a large extent, the technology applied to finance in China has only started 15 to 20 years ago.

Fintech is growing very quickly in China. Half of China’s top 10 unicorns are fintech companies (Ant Financial, Lufax, Jiedaibao, Zhong An Insurance, and JD Finance). In a very short time, Ant Financial has built up a reliable database of individual credit ratings on millions of Chinese who shop on Taobao’s e-commerce platform, enabling it to make small business and individual loans that largely bypass incumbent banks. Jack Ma has always seen Ant Financial as a global player and will continue to position for global expansion.

Of course, there are challenges too. China’s P2P ecosystem has taken a hit over the past year as a lack of transparency has taken its toll.

What are your views on the major differences between Chinese and Western fintech ecosystem?

I guess the Chinese approach to technology in finance has been far less regulated that what we have seen in some of the Western markets. This has been allowing the market to grow without constraints except for products like Bitcoin that are suppressed due to tight regulations. On the hand, you have areas like P2P lending that are not. Now that is changing too as we see more interest in Blockchain technology in China and across the world.

I see only two markets in the world where you can scale rapidly to major growth: US and China.  In these markets, you see fintech companies that can grow to millions of users on a national basis very quickly without changing your core product. You don’t have that in Europe or Southeast Asia where differences in domestic regulations means that you have to change your product for every country.

A big difference between China and America is the number of regulations at the state level. You can’t start a new bank in U.S without going through 200 regulatory discussions with different authorities. However, in China, so long as the government gives the go-ahead, banks like Webank and YesBank can be created almost overnight and scale quickly within weeks. For example, Yu’ebao got to 90 billion USD in assets in within 18 months.

Another part of it is that the Chinese consumers have been under-served as the traditional banks focus on the most profitable segments that make up a small part of the Chinese market. With Alibaba and Tencent platforms, these companies can reach out to millions of such consumers and scale very quickly.

To add on, fintech companies worldwide generally seek to grow in two key areas:

• Serve the underserved: This includes customer and business segments that are not adequately served by incumbent banks. For example, such segments include microloans to small businesses
• Enhance existing products: The introduction of fintech technology offers opportunities to disrupt products and processes served by legacy systems and thinking. For example, Blockchain offers transparency and the potential to enhance international trade financing services

Can you share some examples where Western fintech companies are creatively leveraging data to deliver additional customer value? 

There are 5 or 6 major innovations areas within fintech:

• Payments: Probably the most exciting area is around Payments. Payments is moving into plug-and-play technologies. You have already seen that with PayPal. Now Stripe is taking on PayPal. Since 2011, Stripe has grown to a US$9.2 billion company within 5 years. This is just for an API that allows merchants to get set up within 10 minutes instead of a couple of days rather than a bank. Look out for Stripe. They have recently received investment from Sumitomo Mitsui Card company. In 2016, they have expanded to Indonesia and Singapore.
• Blockchain: I am bullish on Blockchain. Blockchain is a decentralized ledger or database that keeps a record of all transactions that take place across a peer-to-peer network. This technology will be game-changing as it allows market participants to transfer assets across the Internet without the need for a centralized third party. Apart from international payments, there are other applications such as Trade Financing.   Look out for Wave. They manage ownership of trade documents on blockchain eliminating disputes, forgeries, and unnecessary risks. Wave has a collaboration with Barclays Bank and its product helps speed up the time it takes to complete a trade transaction, e.g. letters of credit – from as many as 20 days to just a few hours by eradicating human effort to process a paper trail. Also look out for Everledger, a blockchain-based digital vault that now holds the records of almost 1 million diamonds. Once items are registered on the blockchain, the records are permanent and can’t be changed, providing a clear audit trail to be used by multiple parties throughout the supply chain to prove authenticity and reduce the risk of fraud, theft, and trafficking.
• P2P Lending: The model of P2P lending is very admirable, with algorithms matching lenders with investors with the right risk appetite. In the U.S, P2P lending is now mostly between institutions due to the regulations with regard to securitized lending. As a result, P2P lending is also subject to market forces: in Europe, there are insufficient quality lenders and some P2P platforms have stopped taking deposits. For example, Zopa, a UK P2P platform, has recently tried to diversify its business by targeting to launch a neo-bank in 2018 (or next generation bank or digital-only bank).
• Wealth Management: Roboadvice is already being deployed to target the customers who are just below the private banking tier. However, I am not bullish on roboadvice as this can be offered by existing players like Charles Schwab on top of their services and could be wiped out very quickly. Look out for Charles Schwab Intelligent Platforms, an automated investment advisory service with no advisory fees, no account service fees, and no commissions charged.

In the Chinese context, how can incumbent banks maintain their lead over fintech companies? 

The big 4 Chinese banks are not as agile as newcomers like Baidu and Tencent and traditionally not focused on the consumer side of the business. There are some regulatory barriers to prevent fintech companies from entering the consumer space.

I can’t really comment on One Belt, One Road (OBOR) as I don’t know how that is going to play out. Just an immediate view would be that China does have a problem in terms of slowing growth. The Chinese economy has been delivering annual growth rates of 6 to 7% but is this due to real growth or stimulation of demand? To create sustainable growth, OBOR sounds like a key growth strategy.

Another question in my mind is, “What are Chinese banks going to be doing and how will this support the OBOR initiative?”

Incumbent banks are likely to play an important role and support Chinese businesses that are venturing to less developed parts of the world that are commodity producers. So this is where I see the most activity from the big 4 Chinese banks to support global trade. At this moment, incumbent banks have more experience relative to fintech companies to provide trade services and should build upon this lead.

Incumbent banks worldwide are aware of the potentially disruptive effect of Fintech startups. When you look at what incumbent banks have done elsewhere, DBS (Singapore), Barclays (UK) and Sumitomo Mitsui Financial Group (Japan), they have all actively sought to nurture fintech start-ups while enriching their existing service offerings with the resulting innovations. Chinese incumbent banks may wish to consider a similar strategy.

In the Chinese context, what can Chinese fintech companies do better to challenge the traditional banking incumbents? In particular, what can these newcomers do to gain trust from the consumers or provide services that incumbents are unable to provide?

As a first step, Chinese fintech companies can organize themselves as an industry body to lobby policy-makers and raise consumer awareness. In the US, Amazon, Apple, Google, Intuit, and PayPal have formed a Public Policy Coalition known as Financial Innovation Now. This will make it easier for these newcomers to enter new areas of business within the financial industry. I can easily see Baidu, Tencent, and Alibaba doing something similar.

Within the Chinese fintech ecosystem, Alibaba and Tencent have obvious brand and financial advantages over other rivals. With no brand, no customers, and no trust, it is very hard for independent Chinese Fintech startups to achieve critical mass unless their product is hugely compelling. My view is that Chinese versions of newly launched international Fintech products are unlikely to reach this threshold of innovation.

So what can independent Chinese fintech start-ups do? For start-ups with no brand, starting with something like mobo roboadvice sense as what you are doing is to analyze what customers have got and providing information services. Most consumers will be happy to use such tools. More broadly, their strategy will probably be similar to fintech start-ups elsewhere in the world: Serve the underserved, like providing student loans or small loans to businesses. Also, collaborate with traditional banks which will be beneficial to start-ups in terms of acquiring trust and customers.

Ant Financial, the financial affiliate of e-commerce giant Alibaba, has acquired U.S mobile eye verification startup EyeVerify, Inc., according to an announcement published on Tuesday from the latter.

The companies did not disclose the cost of the acquisition, though sources who spoke to Bloomberg and Fortune value the deal at $70 million USD and $100 million USD, respectively.

The acquisition wasn’t surprising given the history between the two companies. Ant Financial has been using EyeVerify’s authentication technologies for months under a licensing agreement. According to EyeVerify’s press release, the startup’s technology was previously integrated into Ant Fianncial’s payment authentication platform. The tie-up will allow EyeVerify’s technology to be more widely used in Ant Financial’s products.

Founded in 2012 by a team of computer scientists and engineers, EyeVerify is the developer of “EyePrint ID”, a patent technology that verifies the user’s identity by identifying blood vessel patterns in their eye. By reading these vein patterns in selfies, the technology transforms the data into a fifty character password. The company claims that its tool is 99.99% accurate.

EyeVerify currently has 17 U.S. patents issued and 15 more patents pending to continue its expansion, according to the company.

The startup received a $6 million USD Series A round in 2014. Chinese software company Qihoo 360 and Samsung Electronics were also participating investors.

“The acquisition of EyeVerify is a critical part of our effort to make bold, yet thoughtful moves to continually enhance user trust, safety, and experience,” said Jason Lu, vice president of fraud risk management at Ant Financial. “It is an important extension of our efforts to accelerate the global adoption of secure mobile payments and allows us to improve our overall risk management.”

Despite all the innovations around mobile wallets, payment security is still a huge concern for services providers and individual users alike. In recent years, biometric verification technologies have been widely applied from fingerprint, voice, facial, handwriting, and now eye-pattern recognition technology.

Mi Pay, the long-awaited mobile payment service from Xiaomi, will be available for all Xiaomi users from tomorrow (September 1st).

Xiaomi registered a payment service company as early as in 2013, but only in January this year did the company obtain an official license by acquiring a controlling stake in local online payment services company Ruifutong.

Like Apple Pay and Samsung Pay, Mi Pay has partnered with China UnionPay (CUP), the association for China’s banking card industry. Currently Mi Pay supports debit and credit cards from more than 10 Chinese banks.

Earlier in April Xiaomi and UnionPay jointly launched an NFC-based service for public transport fare payments. The service is currently only available in two cities, Shanghai and Shenzhen, but is under test in four more provinces and cities, according to the company. Xiaomi is one of the few smart device brands in China to provide such service.

MIUI 8, the latest version of Xiaomi’s customized Android system, has integrated Mi Pay and the public transport payments service. Preloaded in all Xiaomi smart devices and free for download, MIUI had surpassed 200 million users in May this year, according to Xiaomi.

China’s mobile payment market has so far been dominated by tech giants Tencent and Ant Financial, Alibaba’s finance arm. Alipay, the online payment service of Ant Financial, has reached more than 450 million active users. WeChat Payment, the mobile payment service provided by Tencent’s massively popular mobile messaging app WeChat, had seen 300 million accounts add their bank cards as of March this year. And the two leading payment services have been expanding overseas to take advantage of the rising tides of Chinese outbound tourists.

Mobile payment has become a very important field of competition between smartphone brands and mobile service providers. Apple Pay and Samsung Pay landed in mainland China in February and March this year respectively. Telecommunications equipment and service giant Huawei unveiled Huawei Pay through a partnership with Bank of China in the past March. Baidu, China’s largest search service company, is also heavily promoting the Baidu Wallet mobile payment service.

Xiaomi Finance

Online finance is a hot market for big Chinese tech companies.

Since the establishment of their payment company, Xiaomi has added a variety of mobile financial offerings onto its software system. In early 2014 the company reached a partnership with Bank of Beijing on NFC-based payments, personal financial products and a few other related services.

Xiaomi Finance was unveiled in May 2015 as a mobile app. Unlike most other Xiaomi services that are integrated into the MIUI system, Xiaomi Finance is available for separate download through the iOS App Store and local Android app stores.

The first offering on Xiaomi’s Finance app is Xiaomi Huoqibao (Huoqi means “Current Deposit”), a money market fund similar to Yu’ebao provided by Alibaba’s finance arm. Like Yu’ebao, Xiaomi Huoqibao fund is managed by a third-party company, Tiantian Mutual Fund (our translation) of E Fund Management Co., Ltd.

Xiaomi Finance began testing personal loans in September 2015. The first insurance product was added in June this year.

Xiaomi mentioned in 2015 the development of a user data-based credit scoring system, but it still hasn’t obtained a license for consumer credit scoring operations at that moment. So far only two internet companies, Alibaba’s Ant Financial Services Group and Tencent, have obtained a license and launched their online credit scoring services.

A couple of months ago Xiaomi joined seven Chinese private companies to apply for approval to set up a private bank, according to the announcement released by Hebang, one of the seven approved companies, on July 10th. Tencent and Alibaba’s Ant Financial were in the first batch to get approval to set up private banks. Tencent’s WeBank and Ant Financial’s MyBank, both launched earlier this year, provide online-only banking services.

Xiaomi has also invested some local online finance startups, including the investments in peer-to-peer lending site Jimubox in 2014 and stock trading app Tiger Brokers in August 2015.

Image credit: Xiaomi

China is a powerhouse when it comes to Bitcoin trading. According to a report published by Goldman Sachs last March, about 80% of Bitcoin transactions are driven by the Chinese yuan. However, awareness around Ether, another cryptocurrency, is much lower.

“Bitcoin was a great experiment in monetary policy,” says Andrew Keys, the Head of Global Business Development at Consensus Systems (ConsenSys), a venture production studio for blockchain-based applications and tools.

“What it proved was that I can send you a Bitcoin without a bank,” he says. “Ethereum […] can do peer-to-peer agreements.”

Ether is the cryptocurrency used on Ethereum, a blockchain-based software platform that came five years after Bitcoin. While Bitcoin was designed primarily for peer-to-peer monetary transactions, such as payments, Ethereum was invented to fit a much broader context. Any software application can be uploaded onto Ethereum’s decentralized platform: housing rental, equity distribution, voting, and more. The Ethereum Foundation calls it a “programmable blockchain.”

Put another way, Ethereum is a way for software programs, or what are known as ‘contracts’ on Ethereum,  to execute the way they were programmed to without interference. That means that two parties can agree on and be held to a digital contract without lawyers, the police, or any kind of intermediary. Trying to change the contract or take it down would be almost impossible, as contracts on Ethereum are stored on a distributed network of servers – the Ethereum blockchain.

ConsenSys wants to bring Ethereum to China’s tech and finance giants, such as Tencent, Ping An, Ant Financial, and Alibaba.

“Every single one [of them] is open to a proof of concept, where we give them a private instance of the Ethereum blockchain,” says Mr. Keys.

For Chinese companies and financial institutions, such as banks and insurance companies, the lure of Ethereum lies in its potential to cut costs. But Ethereum’s blockchain could be useful in other contexts as well. ConsenSys is working on about thirty different decentralized applications – or ‘dApps’ – for Ethereum’s blockchain. They range from event management to online poker, to a smart music contract dApp that musician Imogen Heap used last October to release one of her singles.

“Over the next month, we’re going to do webinars and demonstrations with the CTO and technical teams of all those companies I just mentioned,” says Mr. Keys.  “We kind of show them the art of the possible, then from that they say, ‘Okay, we have a pain point here and a pain point there – can we apply the technology to ameliorate those pain points?’”

“When we come back [in September], we’re going to further elaborate on how we work together,” he says. That could include joint ventures or something simpler, where ConsenSys educates its partners on Ethereum and gives them the infrastructure to build their own Apps, he says.

The meetings are still in early stages, but ConsenSys is serious about putting down roots in the Chinese market. Founded in 2014, the company has moved quickly through its partnership with Microsoft and its Azure cloud computing platform to discuss and seal deals with other companies.

In China, the buzz around blockchain technology is starting to pique interests among tech companies and financial institutions. In June, a group of more than thirty technology and financial firms, including Ping An Bank and Tencent, created a consortium dedicated to blockchain applications. A month before that, a non-profit called ChinaLedger Alliance launched with the aim of promoting blockchain technology in China. The non-profit is led by Wanxiang Blockchain Labs, a Shanghai-based non-profit by Chinese auto conglomerate Wanxiang Group.

Image credit: Ethereum Foundation

In China, human vs. machine face-offs are just as much about entertainment as they are about technology. On Thursday, Ant Financial, the financial affiliate of Alibaba Group, held a facial recognition contest between T.V celebrity Wang Yuheng and “Mark” (蚂可), the facial recognition AI for Alipay, Ant Financial’s mobile payment system.

Over the course of three half hour rounds, Mark and Mr. Wang identified livestreaming celebrities at the event from hundreds of photographs. Both human and AI guessed correctly for the first two rounds, which involved 150 and 300 photographs, respectively. However, in the third round, when Mark and Mr. Wang were asked to identify the childhood photographs of two livestreaming hosts, and Mark lost.

“We wanted to see how the recognition abilities of super humans like [Wang Yuheng] compared to those of a machine,” Dr. Chen Jidong, the Senior Data Expert at Ant Financial, told TechNode.

“We want to absorb and incorporate their special recognition abilities into our algorithm so that our AI can more safely and conveniently service users,” he says.

Mr. Wang is known for his appearance on the Chinese talent show, “The Brain” (最强大脑), which pits geniuses from different countries against each other. To win, participants complete various challenges, such as identifying which glass a judge drank out of given 520 glasses of water – the challenge that earned Mr. Wang the nickname “Water Brother” (水哥, our translation).

“I believe that Mark has learned a lot in interacting with Water Brother, but it has a long way to go when compared to humans,” said Dr. Chen after Mark lost in the final round. “This event isn’t really a [battle]. We’re just hoping that more people will understand this technology.”

The contest is largely a publicity stunt, similar to the one by Alibaba in April. Using information like social media content and song popularity, the Alibaba’s AI accurately predicted the finalists and winner of Chinese reality singing show I’m A Singer. Mark’s algorithm was developed by Face++, one of Ant Financial’s partners. The Beijing-based startup specializes in face recognition technology and also powers Alipay’s “smile to pay” service.

Alipay’s facial recognition feature has been around for about a year, but is still being perfected, says Dr. Chen. As a finance-related application, Ant Financial has “very strict” requirements when it comes to its false acceptance rate (FAR), or identifying the wrong person. The technology also has to mesh well with the Alipay app and deliver a smooth user experience for all kinds of users. The point is to someday make passwords obsolete, says Dr. Chen.

“We hope that users will try [our facial verification feature] under different light settings, different angles…even while wearing makeup to see if it will pass,” says Dr. Chen. Improving Mark’s performance under challenging environments is one of Ant Financial’s ongoing initiatives. In the case of the childhood photographs, many were shot in dim lighting, contributing to Mark’s errors.

In addition to photo quality, data security is one of the key challenges for financial applications of biometric technology. Simply using one biometric method – a face scan – to verify someone’s identity is not ideal, says Dr. Chen. In the future, Ant Financial plans to incorporate other biometric methods as well, such as behavioral patterns and the user’s social network.

In addition to Ant Financial, other Chinese companies, such as Ping An, are also looking at using biometric identification. In April, Ping An launched its face recognition loan technology, which cuts down the loan application process to six minutes and can differentiate between twins, according to the company.

Image credit: Ant Financial

Ant Financial, the financial affiliate of e-commerce giant Alibaba, is planning to acquire a 20 percent stake in Thai third-party payment company Ascend Money, according to an announcement made by China’s Ministry of Commerce last Wednesday.

The investment was proposed by Ant Financial’s Hong Kong-listed payment unit Alipay (Hong Kong) Holding Ltd. In addition, the Chinese company is also seeking an option to increase its stake by a further 10 percent within 21 months of the transaction being finalized.

Ascend Money, a newly established unit of Ascend Group, is the parent company of online payment service True Money and licensed financial services provider Ascend Nano. Ascend Group is a spin-off from True Corporation, a top-three telecom carrier in Thailand.

As the dominant payment platform in China, Alipay has long set its sights on overseas market to maintain high-speed growth beyond domestic market, where it is facing tightening competition from Tencent’s rival WeChat payment.

Last year, Ant Financial invested over $500 million USD in India’s largest online wallet provider PayTM, which now holds an online banking license in the country. The Chinese firm also helped launched online bank K Bank in Korea with local partners, but due to government restrictions the company still only holds a 2% in the joint venture.

Ant Financial sealed a $4.5 billion USD B round this April at a market valuation of over $60 billion USD.

Alibaba’s finance arm, Ant Financial, has further expanded their fintech empire with a new investment in Chinese finance data provider Shanghai Suntime Information Technology (朝阳永续).

According to a source who spoke to Reuters news agency, the Alibaba affiliate invested $35 million USD for one fifth of the data company. The injection makes Ant Financial the second largest stakeholder in the company, behind company chairman Liao Bing.

Shanghai Suntime provides a range of finance-related services, including a high-level wealth management platform for tracking the performance of hedge funds and other large asset groups. The company is also performs data analysis and earnings forecast services for listed companies.

Ant Financial, which oversees a range of finance and insurance services, including China’s most popular online payment service Alipay, raised $4.5 billion USD in April to fuel additional investments. The company is currently valued at around $60 billion USD.

Last week Alibaba CEO Jack Ma said he foresees a Hong Kong listing for Ant Financial, unlike Alibaba which listed on the New York Stock Exchange in late 2014.

Uber has announced a global expansion of their partnership with Alipay, the dominant Chinese online payment service, allowing mainland users to use their native payments internationally. Previously Chinese users would have to link their account to a dual currency credit card.

Its a major move for Uber, who have been running a multi-billion dollar campaign to boost their services in China. They can now potentially monetize on the 120 million outbound trips made by Chinese tourists every year, a larger population than some of the countries that Uber operates in.

It’s also created a significant new foothold for Uber in their effort to outpace Chinese ride-hailing giant Didi Chuxing.

Through mutual investors and direct investment, Didi has created a formidable network of international ride-hailing partners, including U.S.-based Lyft, Singapore’s Grab Taxi and India’s Ola Cabs. Didi has already begun leveraging this network to capture the market of traveling consumers. This year they announced that Lyft drivers could be hailed in the U.S. through Didi Chuxing’s Chinese app, while Didi drivers can be hailed in China by Lyft users.

By expanding Alipay to the 400+ global cities and 68 countries that Uber is currently working in, they have essentially matched the potential payment advantage offered by Didi’s global network.

Through the partnership with Alipay Uber has also forged a strategic partnership with PayTM, a leading Indian payments company that is backed by Alipay’s parent company Ant Financial.

“Alipay’s collaboration with Uber reflects a step forward of Ant Financial’s global strategy,” said Ant Financial President Eric Jing, “and the collaboration also extends to the Alipay’s strategic global partners like Paytm in India.”

Alipay’s parent company, Ant Financial, recently raised a $4.5 billion USD funding round, setting a global record for the largest-ever single funding event for a privately owned tech company. Alibaba is the largest shareholder in Ant Financial, which spun off from Alibaba in 2014.

Interestingly, Alibaba is also a major shareholder in Didi Chuxing, which goes to show that when it comes to extending their international payment network, Ant Financial has no qualms crossing the lines of loyalty laid out by their biggest shareholder.

Ant Financial Services Group, the financial affiliate of e-commerce titan Alibaba, announced today the completion of a US$4.5 billion series B financing. The funding size is astounding, as the company claims it to be the largest-ever individual private tech investment globally.

Unsurprisingly, the investor list is long and consists of big names, including consortiums led by China Investment Corp Capital and CCB Trust, a subsidiary of China Construction Bank, along with existing Series A shareholders including China Life, China Post Group, the parent company of the Postal Savings Bank of China, China Development Bank Capital and Primavera Capital Group.

The company secured an undisclosed amount of Series A financing in July last year at a value reportedly over $45 billion USD. Following the latest round the valuation is expected to surpass US$60 billion.

Ant Financial has grown from their core service, Alipay, and spun out from parent Alibaba in 2011 before its blockbuster U.S. IPO. With an active annual user base of 450 million, it provides payment services for e-commerce marketplaces. Those services covers a wide range from wealth management and insurance to micro loans for small and micro enterprises as well as financing for individual consumers.

This new round of funding will support Ant Financial in its goal to expand access to financial services in China’s rural areas, while also fuelling the company’s globalization, according to the company.

The company’s strategic partnership with China Investment Corp Capital will support their continued push into international markets.

In India, Ant Financial has joined forces with One97 Communications, which oversees Paytm, the country’s largest mobile wallet provider, to fund payment services in the under-services Indian e-commerce market.

As of the end of March 2016, MYbank, established by Ant Financial in June 2015, and Ant Micro Loan have collectively provided micro loans to over 20 million small and micro businesses and individual entrepreneurs, according to the company.

“The capital raised in Series B will allow us to invest in the infrastructure, such as cloud computing and risk control, that will underpin our long-term growth in rural and international markets,” said Eric Jing, President of Ant Financial.

China’s internet giants are gearing up for some serious spending. Tencent, the gaming and social network giant behind WeChat, is now in talks with five banks to raise a $2 billion USD syndicated loan, according to sources who spoke to the Wall Street Journal.

News of the financing comes five months after the company secured a $1.5 billion dollar loan, and just one month after fellow internet powerhouse Alibaba announced a $3 billion USD syndicated bank loan.

Tencent and Alibaba have continued their expansion both locally and abroad with a spate of large investments in hotly contested sectors including ride-sharing, entertainment, finance and on-demand services.

Both companies are said to be participating in an imminent $1.5 billion USD funding round for market-leading ride-hailing app Didi Chuxing (formerly Didi Kuaidi). Tencent backed a $3.3 billion USD investment in on-demand services firm Meituan-Dianping last year, while Alibaba has since sold their stake in Meituan-Dianping to back their own on-demand empire.

This week Alibaba and their financial affiliate, Ant Financial, revealed a deal to invest $1.25 billion USD in food delivery app Ele.me, which will share resources with Alibaba’s other big bet in the industry, on-demand firm Koubei.

Tencent’s new loan could also be targeted at another core market rivalry: finance. Tencent is the largest shareholder in WeBank, the online banking affiliate that competes directly with Alibaba’s Ant Financial. Both companies have make aggressive strides into payments, personal banking and data-backed credit systems, working on both personal and enterprise financing.

Five banks will underwrite the loan which is expected to close by next month (the same banking partners as the previous $1.5 billion USD round), Bank of China, ANZ, HSBC, Citigroup and Mizuho Financial Group.

After much speculation it’s been confirmed that Alibaba and their financial affiliate, Ant Financial, will together invest $1.25 billion USD in Chinese on-demand food delivery app Ele.me.

Alibaba will pitch in $900 million USD while Ant Financial will add an extra $350 million to the round. The deal also includes a new partnership between Alibaba’s own on demand services platform, Koubei, and Ele.me.

The duo now represents Alibaba’s biggest bet in the on-demand market. Alongside the $1.25 billion injection into Ele.me, the Chinese internet giant also pledged 3 billion yuan to growing out Koubei. Ant Financial also committed the same amount to the project.

Alibaba have not revealed further details on the deal, including how much their stake in the food delivery service would be. Last year Chinese financial magazine Caixin reported that the deal being discussed was for a 27.7% stake.

The news comes just months after Alibaba sealed a deal to sell their stake in competing on-demand service Meituan-Dianping, which also happens to be backed by Tencent. The other large competitor in the market is Nuomi, the on-demand platform that search giant Baidu has pledged $3 billion USD to improve.

The Ali-Ele.me partnership ties up a lot of loose ends in the highly-contested on demand market. During the Meituan-Dianping merger last year, and their subsequent $3.3 billion USD funding round (which rocketed the company’s valuation to over $18 billion USD), there was much speculation over which camp Alibaba would choose and whether they would maintain their stake in Meituan-Dianping.

It’s now clear that China’s deep pocketed tech giants intend on spending heavily through another subsidy-fueled war of attrition in the on-demand space.

While some onlookers believe a capital winter could be just the medicine China’s young tech community needs, established startups are seeking more capital than ever. From real estate to fintech and on-demand services, no one appears to be shying away from a heavy cash burn-rate in 2016.

Here are three multi-billion dollar deals that have come to light over the past week, worth a combined $6 billion, which show just how fearless China’s VC environment is in 2016.

1. Alibaba’s Finance Arm Ant Financial Is Seeking At Least $3.5 billion USD

Ant Financial, the Alibaba-backed finance giant behind Alipay, is looking to raise a round of at least 20 billion yuan ($3.5 billion USD), bringing the company’s total valuation to around $60 billion USD. Ant Financial’s 2015/2016 investment portfolio is incredibly diverse, and includes everything from Indian payment platform, PayTM, to the China’s Postal Savings Bank. The company raised $1.9 billion USD in their first round last year. The latest round could be the foundation for a highly-anticipated IPO.

2. Real Estate Company Homelink Looks To Raise $1 billion USD

Homelink Real Estate Brokerage Co., a Beijing-based property broker founded in 2001, is seeking to raise around $1 billion USD with interest from internet giants Tencent and Baidu, valuing the company at near 40 billion yuan ($6.2 billion USD). While demand for new property has dwindled over the the past 18 months, internet companies are still clamoring to take a bite of the market. Online companies in the industry including Soufun and Fangdd have surged ahead with new funding in the past six months as the country eases restrictions on home ownership.

3. Didi Kuaidi Raises Funding Target To $1.5 billion USD

China’s leading ride-hailing service Didi Kuaidi could see their valuation top $20 billion USD if the company is able to settle their $1.5 billion USD funding target. The company has been locked in an aggressive spending war with Uber, which currently values their China arm at near $7 billion USD. Uber currently claims to hold an estimated 30 percent share of private car services in China, versus Didi Kuaidi’s claim of 86 percent. The actual metrics vary depending on which aspects of the business you measure. The latest injection of funding into the Alibaba-Tencent-backed Chinese service shows that the cash-burning on-demand wars of 2015 are well and truly set to continue into 2016.

When it comes to China’s internet giants, there’s barely a player that hasn’t entered the world of online financing. Following in the footsteps of Alibaba, many of these companies are looking to finance as a means of subsidizing heavy cash burn rates in their core businesses.

Ant Financial, which oversees Alipay, the country’s largest mobile payment service, is the financial affiliate of internet powerhouse Alibaba. Following their rebranding in 2014, Ant Financial has expanded to become a full-fledged financial services company, with a range of services and high-level cross-border finance related investments.

JD.com, a leading online Chinese retailer, began providing short-term credit to its suppliers in 2012 and later to third-party sellers on its online retail platform. JD Finance, established in 2013, now provides products and services in supply chain finance, consumer credit, wealth management, crowdfunding, digital payment, and insurance as of late 2015, according to the company.

Social network giant Tencent has been working on funneling users from their highly popular social networks, WeChat and Mobile QQ, to Licaitong, an online financial products marketplace launched in early 2014. WeBank, the online-only private bank jointly established by Tencent, has launched a handful of online banking and financial services since its opening in early 2015.

Not to be left out, smartphone startup giant Xiaomi unveiled MiFinance in May 2015, a mobile app that sells financial services to Xiaomi users. Sina, the leading online news portal and parent company of social media service Weibo, search giant Baidu, and Qihoo 360 have also tapped into the sector with some me-too offerings. Renren, the notorious Facebook clone, has even shifted their entire business model to focus to internet-based finance following the slow decline of their social business.

Mid-sized Chinese tech companies, especially online marketplace operators, have also begun providing loans to merchants on their platforms, offering consumer credit options as well as selling traditional financial services. These companies include classified platform 58.com and market-leading online travel services Ctrip, Qunar.com, and Tuniu.com.

58.com provides short-term loans and installment options, not only to merchant customers who post classified ads, but also to users who wish to to purchase cars and real estate. Ctrip and Qunar, the two leading online travel services who merged in 2015, announced an online insurance products platform last month.

A Proven Model

Alibaba’s Ant Financial is reportedly valued at more than US$50 billion in an ongoing fundraising round.

Alibaba began making loans to merchants on their Taobao marketplace in 2010. Today, Ant Financial has Alipay, micro-loans service MyBank, online consumer credit portal Ant Check Later, credit scoring tool Sesame Credit, money market fund Yu’e Bao, online investment marketplace Zhao Cai Bao, personal finance management platform Ant Fortune, online equity crowdfunding platform ANTSDAQ and Ant Financial Cloud service.

Yu’e Bao became one of the largest money-market funds in China immediately after its launch in mid-2013. Within one year over 100 million users purchased RMB 574.1 billion (US$92 billion) worth of Ye’E Bao funds. At the same time MyBank had had some 800,000 small business customers and made RMB45 billion ($7 billion USD) in loans within eight months since launch in mid-2015, according to the company.

Alibaba Group and Ant Financial together have a host of advantages in the online finance market which has helped them to slay early competitors and wipe out mid-size competitors. Alibaba’s big data capabilities offer a wealth of historical data on merchants and consumers which has helped them moderate credit risk, they also had a huge customer base ripe for conversion at the time of the launch as well as efficient and scalable online infrastructure.

Ant Financial has targeted two core demographics in China: small businesses that have long had difficulties getting loans from banks, and the large percentage of Chinese consumers who have never owned a credit card or purchased any financial products.

A Higher Margin Business For Tech Companies, (Especially The Financially Struggling Ones).

Liu Qiangdong (aka. Richard Liu), founder and CEO of JD.com, said in March 2014 that they expected some 70% of the company’s net profit to be from their financial offerings ten years from then, although the online retailer still wasn’t turning a profit at the time. JD.com recorded US$29 million in operating losses for 2015 even though its gross merchandize volume and revenues reached US$69 billion and US$29 billion respectively.

In the tech industry it’s not unusual to see startups losing money despite having a large user base and a high value. The country’s highly competitive tech sector strongly prioritizes market share acquisition, oftentimes resulting in a severe cash burn.

JD.com, 58.com, Qunar and Tuniu are all online marketplace operators, each with hundreds of millions of users and a large business customer base. They make revenue through online marketing and advertising, merchant-facing premium subscriptions and a few other minor sources. All of them were still losing money as of the end of 2015.

To them the Ant Financial model appears to be a perfect way to monetize quickly in a tight market, one that may have a much higher profit margins than their respective core businesses. The step form online transactions to financial products is relatively minimal, especially if they have large amounts of customer data at hand.

There’s no definitive timeline as to when these companies will be able to turn a profit through online finance, but their financial arms are receiving massive private valuations. JD Finance announced a RMB6.65 billion ($1 billion USD) financing round at a valuation of RMB46.65 billion (roughly $7.1 billion USD) this January. Investors include Sequoia Capital China, China Harvest Investments and China Taiping Insurance.

Image credit: Tencent, Ant Financial

China’s e-commerce powerhouses have spent the holiday season locking down some serious funding for their finance arms.

JD.com announced a 6.65 billion yuan (about $1 billion USD) funding injection into their finance subsidiary, JD Finance, on Saturday. The latest round values the entity at 46.65 billion yuan ($7 billion USD), according to a release from the company.

The funding was led by top investors Sequoia Capital, China Harvest Investments and China Taiping Insurance, according to JD.

“With our top risk management technology and the additional expertise from our investors and partners, we look forward to significantly expanding JD Finance’s service offerings and market reach,” said JD CEO Richard Liu in a statement.

It follows an announcement earlier this month from Alibaba’s finance arm Ant Financial, who revealed they had officially begun a second round of funding. Ant Financial operates Alipay, the hugely popular payment service boasting over 400 million users.

China’s e-commerce players have been amassing scores of consumer-facing finance products in the past 18 months, and new funding between the country’s two top rivals, Alibaba and JD.com, signals the trend will continue in 2016.

Tencent, the social and gaming giant behind WeChat, is also rumored to be seeking fresh funds north of $1 billion USD for their online-banking arm WeBank. Tencent is also a backer of JD.com.

JD.com noted in the release that they would maintain majority ownership of JD Finance in the wake the latest funding round.

Ant Financial Services Group, Alibaba’s financial affiliate, has launched a beta version of their long-awaited online equity crowdfunding platform, ANTSDAQ.

ANTSDAQ has set limits for investors to meet Chinese financial regulations in line with other local equity crowdfunding sites.

Participants are required to have financial assets of at least RMB1 million ( US$170,000) and have earned no less than 300,000 RMB ( US$48,000) in annual average income for the last three years. The company has developed an internal system to assess potential investors.

Projects are required to be registered customers of Alipay for enterprise, and investors need to be registered users of Alipay’s payment service as well as Yu’ebao, the money market fund available on Alipay. The platform currently doesn’t charge investors any fees.

Currently the site features four startups, Jiemo, a supply chain finance platform, Renren Xiang, a restaurant chain, Lyan Coffee, a coffee delivery company, and Zero Carbon Technology, which produces energy-efficient appliances. The companies are intending to raise between RMB 13 million and RMB27 million each ($2-4.2 million USD). Initial fundraising campaigns will launch next week and run until the end of December.

Investment roadshows will take place in the coming weeks on Dingtalk, also known as Dingding, the team collaboration app developed by Alibaba.

Ant Financial, formerly part of Alibaba Group, has been making online loans to small and medium-sized merchants within its e-commerce marketplaces as well as through other channels. Ant Financial made a strategic investment in 36Kr this October, which operates a startup database and their own equity crowdfunding platform.

The Development Of Equity Crowdfunding In China

The Securities Association of China issued draft rules on online equity crowdfunding in late 2014, requiring them to put a limit on investors’ financial assets and annual average income. According to the existing financial regulations, no more than 200 individual shareholders are allowed to invest in a company.

Ant Financial is one of the first three, together JD.com’s finance arm and Ping An’s consumer loan company, that has been approved by Chinese authorities to operate an official equity crowdfunding platform.

JD’s Dongjia was launched in March this year, with every round of funding on the platform led by a professional investor. It also has set limits on participants’ annual income and financial assets. Ping An unveiled its Qianhai CrowdFunding in April this year, adopting a model similar to JD’s.

AngelList-like equity crowdfunding platforms have been operating in droves on the mainland even before the regulations were issued. A total of 1 billion RMB (about US$166mn) was raised from more than 3000 transactions through Chinese equity crowdfunding sites in 2014, according to a report by venture capital firm Zero2IPO. More than a dozen equity crowdfunding sites were launched in the first half of 2015.

ZhenFund, the early-stage venture capital firm, launched Zhen Shares (Zhen Gu in Chinese) in June this year. The platform helps startups that have received angel funding from ZhenFund to raise money from their core users. Its first project was an online fitness community that raised more than RMB117,000 (about US$19,000) from selected users (source in Chinese).

There’re some other variations in online equity crowdfunding in China. VC.cn (formerly Chuangtouquan), founded in 2011, doesn’t consider itself a crowdfunding site. However the only major difference it has from other equity crowdfunding platforms is it only accepts experienced angel investors.

The company charged startups for services including financial advice before July 2014. It then decided to make returns by investing in projects with their own money. More than 150 projects on its platform have raised a total of over 200 million RMB as of July 2014, according to the company.

image credit: Ant Financial, Shutterstock

Despite stock price woes it’s full steam ahead for Alibaba’s finance arm, Zhejiang Ant Financial, who revealed plans to invest 1.2 billion yuan ($188 million USD) into the China insurance arm of Taiwan-based Cathay Financial Holdings on Monday.

It’s very much a strategical asset for Ant Financial, who will hold a 60% stake following the deal, according to a statement from the Taiwanese company. The partnership will allow Ant Financial to extend it’s online insurance services and avoid applying for extra licensing.

The internet insurance sector has grown in leaps and bounds, transforming the industry in China. Sales of online insurance neared $13 billion USD in the first six months of 2015, according to the Insurance Association of China, on par with the total amount for 2014.

Fast growing sectors include motor insurance, which accounts for over 56% of the total online insurance spend. Automotive insurance is interestingly one of the main focuses of Cathay Financial, Ant Financial’s new market partner.

The development of e-commerce platforms including Alibaba’s Taobao and JD.com also have driven online insurance numbers.

Ant Financial introduced a platform last month, called Ant Fortune, that lets users select from hundreds of fund products from over 80 local financial institutions.

The company teamed up with Tencent and Chinese insurance company Ping An in November 2013 to launch an online insurance company called Zhong An.

@CateCadell

Alibaba’s internet financial affiliate Ant Financial has sealed a private investment deal from China Post Capital, the state-owned investment institution of postal service China Post Group Corp., making them the second largest strategic shareholder in Ant Financial. The two parties already began a strategic partnership last June.

The investment comes after an undisclosed amount of A round led by China’s National Social Security Fund (NSSF), a deal which valued the Alibaba spin-off at $45-$50 billion USD. The social security fund holds a 5% stake in Ant Financial.

Ant Financial operates a series of financial businesses ranging from the country’s most popular payment service Alipay, mutual fund service Yu’e Bao to online credit scoring service Sesame Credit. It has also received the license to run an internet bank, Mybank, which can issue limited loans.

One of the reasons the investment is so valuable is that it may tighten the alliance between Ant Financial and Postal Savings Bank of China (PSBC), the wholly-owned commercial bank of China Post Group Corp. As China’s largest bank by outlets, PSBC has 40,000 branches around the country, offering micro-credit to China’s underserved small businesses and individual borrowers.

The vast offline resources of PSBC, especially in towns and villages, is expected to facilitate Ant Financial’s rural expansion in its attempt to shake up China’s conservative finance sector.

The two companies are also in discussion on cooperation between China Post and Alibaba Group as well as wider applications for Alibaba’s Cainiao logistic system in rural areas.

PSBC is reportedly preparing for an IPO next year, which could raise around $25 billion – the record for an IPO set last year by Alibaba Group. Ant Financial, Singapore’s Temasek Holdings and French bank BNP Paribas and several U.S. PE institutions are reportedly among the preliminary bidders for PSBC’s pre-IPO stake.

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Alibaba and Tencent to Launch Consumer Credit Rating Services

image credit: iHeima

In late 2014, Alipay Wallet, the mobile app under Alibaba’s finance arm Ant Financial, added a stock portfolio tracker for users to monitor the performance of their portfolios, and read news or other information about listed companies, apart from making mobile payments, paying utility bills, buying mutual funds such as Yuebao, amongst others.

More recently Alipay Wallet enabled bundling accounts with 13 local broker-dealers. But users can only check their stock investments with those dealers but execute trades, for Alipay’s parent company reportedly hasn’t obtained a license for stock trading.

It was reported in the first half of 2014 that the company planned to acquire a private security company which must own a license. Though it hasn’t acquired any security company or obtained a license independently, Ant Financial is developing a separate mobile app that will be able to execute trades, as first noted by bbtnews.

Ant Financial, Alibaba’s finance arm, has begun beta-testing the long-awaited Sesame Credit (‘Zhima Xinyong’ in Chinese), the user data-based online credit scoring service.

Sesame Credit generates credit scores based on the online behaviour of consumers and small businesses on Alibaba’s Taobao (consumer-to-consumer) and Tmall (business-to-consumer) marketplaces. It is the first of its kind in China, and few if any other Chinese companies able to collect as much data as Alibaba.

Users can either check their Sesame Scores in the Alipay Wallet mobile app or through merchant websites who accept the service. Scores range from 350 to 950 points, with higher the number the better.

There are more than 300 million real-name registered users and 37 million small businesses on Alibaba’s platforms. Data collected include webpages users visit, goods they purchase, and payment histories on Alipay.

Sesame Credit also obtains user data from partners, public agencies, financial  institutions, and various types of merchants, according to the company.

Alibaba pointed out that Sesame Credit would make credit more widely available to consumers or small business owners who have limited traditional credit history. “They may have never obtained bank loans or applied for credit cards. However, they might be active internet users who shop online a lot, e-pay their utility bills on time, have a stable residential status and have been using their mobile phone numbers for a long time”, said Yu Wujie, Chief Data Scientist at Sesame Credit.

Besides helping existing financial product providers to make credit decisions, Sesame Credit hopes to encourage businesses to create more credit-related services. Some Chinese hotels now allow travellers with superior Sesame Credit scores to stay without paying in advance. Sesame Credit is also conducting a test program with a Chinese online dating service that allows users to check their potential dates’ credit scores.

Alibaba addressed privacy concerns by stating that data are collected “only with the knowledge and consent of the individual subjects of the information. All data is encrypted and segregated. Access to a specific subject’s credit scores can occur only with the Sesame Credit’s services are expected to be applied in a slew of daily life scenarios.”

Editing by Mike Cormack (@bucketoftongues)

Shoppers on Alibaba’s Tmall and Taobao can now take out month-to-month loans of up to RMB30,000 (roughly US$4800). The new payment option is called Huabei, or ‘Just Spend’, and was released by Ant Financial Services Group, the Alibaba affiliate that oversees Alipay.

According to Ant Financial, over one million vendors are using the credit system. It is currently in a testing phase and a formal release has not yet been announced. The service allows consumers to pay off debts up to a month after delivery with a minimum purchase of RMB1,000 yuan (roughly US$160). Consumers will be expected to pay of the loans by the 10th day of the month following delivery.

In September, Ant Financial also announced that it aims to create a marketplace of 1 trillion yuan (roughly US$1.6 billion) over the coming 2 years, a number which will factor in the new Just Spend credit function.

Alibaba founder Jack Ma and a partner own a controlling stake in Ant Finance Services Group, who in-turn will finance the Just Spend function. While the two companies are formally separate, Ant Financial shares a 37.5% profit stake with Alibaba. Ant Financial also currently runs a micro-credit subsidiary called Ant Micro. Earlier this year it launched micro-loan platform Zhaocaibao, which is a marketplace for financial institutes to list finance products.

Competing retailer JD.com launched a credit option in February, offering up to 15,000 yuan (roughly US$2400) on a similar 30-day repayment plan. Tech giant Sina Weibo also launched a credit service called Xinyongbao this time last year, however it is still confined to minor purchases. Alibaba’s new Just Spend currently offers the largest credit advance of the major online consumer marketplaces in China.

Credit services have been historically under-utilised in China, making up just a fraction of the national GDP. However the past 5 years has seen a growth in household debt, as younger Chinese consumers are increasingly willing to take on new financing options.

The announcement also comes at a time when Alipay is expanding its consumer reach overseas. In November Ant Financial revealed that it will now offer direct purchase options for American vendors including department stores Neiman Marcus, Macy’s, Bloomingdales and Sak’s Fifth Avenue.

Image Source: Shutterstock.com

It is well-known that Alibaba’s finance arm have been working on an online credit rating system, based on users’ purchasing history and other online behavior. Tencent, which is now competing with Alibaba in numerous sectors, last week announced they would release a similar system at the company’s annual partner conference.

While Alibaba makes small loans to online retailers on its e-commerce marketplaces, Tencent doesn’t operate such a business. The credit reports generated through Alibaba’s Sesame system are expected to be largely used for Alibaba’s finance arm to make credit decisions, while Tencent’s will be sold to financial institutions.

Tencent claims the user data generated across its products are far more in-depth than any others. But it is easy to see the user data collected by Tencent cannot be as useful to financial institutions as Alibaba’s. For instance, I use Tencent’s products only for chatting with friends on QQ and capturing screenshots with a tool developed by the company. I don’t see a credit report based on that will be accurate.

Recently, WeChat’s payment service and money transaction functions have become increasingly popular. With more data from WeChat, Tencent’s credit rating system may improve as time goes by.