China’s regulatory red tape will cut colossus Ant down to size

Antitrust move targets the country’s big tech such as Alibaba and Tencent

Ant has rarely been out of the business headlines since the group’s whopping US$37 billion IPO was shelved last year.

Since the initial public offering fiasco, behind-the-scenes negotiations have taken place to turn the Alibaba affiliate into a “holding company.”

On Thursday, reports emerged that the fintech giant had agreed to restructure plans outlined by China’s regulators.

If the move goes ahead, Ant will be turned into a de facto bank and subject to capital requirements similar to those of traditional bricks and mortar lenders.

An announcement is likely to be made before the start of China’s New Year holiday next week, the Bloomberg news agency reported.

“Business will definitely be impacted [but it] will depend on how strictly we follow the new online lending rules,” a person close to the company, who declined to be named, told the Financial Times.

The facts:

  • Ant’s multibillion operation centers around online payments and loans, free of the red tape of regulation governing traditional banks and financial companies.
  • A restructuring agreement would ease investor concerns about a regulatory crackdown on billionaire owner Jack Ma’s Alibaba empire.
  • He has been persona non grata with China’s ruling Communist Party elite since he took a verbal pickaxe to the regulatory system during a major speech at the Bund Summit 2020 in Shanghai.
  • “Today’s financial system is the legacy of the Industrial Age. We must set up a new one for the next generation and young people,” he said at the time.
  • The Party was furious with Ma’s comments and he disappeared from public view for nearly two months before emerging again in January.
  • His companies are now facing antitrust investigations in their home market.
  • Beijing has targeted China’s big tech such as Alibaba and Tencent.

What was said: “In China, the government sees how powerful these companies have become. From a pure antitrust perspective, it seems, the ‘same-same-but-different approach’ will no longer hold,” Adrian Emch, a partner at the legal firm Hogan Lovells, said as reported by the Reuters news agency.

Sales of Lenovo laptops, PCs and tablets increased during the Covid-19 pandemic. Photo: Lenovo 
Covid-19 is so PC for Lenovo Group

Every pandemic has a silver lining. For China’s Lenovo Group, the Covid-19 crisis has been a key driver of growth with more people being forced to work from home.

The world’s leading manufacturer of personal computers posted record profits and revenue in the third quarter. Net profits jumped by 53% to a record US$395 million during the three months that ended in December compared to the same period in 2019. 

“The pandemic is driving people’s new behavior … We believe even after the pandemic the new normal will continue,” Yang Yuanqing, the chairman of Lenovo, said after the results were announced.

The facts:

  • Lenovo’s global shipments of tablet computers topped 5.6 million.
  • That was a year-on-year increase of 120% with a market share of 8.9%, according to research firm Strategy Analytics.
  • Lenovo also extended its lead in the PC market to more than 27%.
  • The tech firm announced it will set up a Solutions & Services Group across big data digital services.
  • Its software and services business represents 8% of the Chinese company’s revenue.

What was said: “Lenovo had a very strong quarter as their portfolios are wide-ranging, up-to-date and innovative for entertainment and productivity needs,” Chirag Upadhyay, an industry analyst at Strategy Analytics, said as reported by Chinese media group Caixin.

Ford’s Mustang Mach-E will be rolled out in China. Photo: Ford
Ford backs iconic Mustang and kicks Zotye into touch

Ford has announced it will terminate plans to launch an electric vehicle joint venture with China’s Zotye Automobile.

The move came after the American auto giant announced it would start manufacturing an all-electric Mustang Mach-E with Chinese partner Chongqing Changan Automobile Company. 

In 2017, Ford and Zotye agreed to invest at least US$756 million to set up a 50-50 joint venture in the world’s second-largest economy to build small electric passenger cars.

But on Thursday that appeared to unravel when the US brand name said it would pursue a more “flexible business model in China.”

“A breakthrough vehicle in Ford’s electrification strategy, the Mustang Mach-E will set new standards in style and performance in the Chinese high-end EV market when it becomes available in China later this year,” Ford said in a statement about the Mach-E at the end of January.

The facts:

  • Ford is investing more than US$11.5 billion in electric vehicle development through 2022.
  • The Mach-E will be an all-electric model from the iconic Mustang stable with production starting later this year.
  • Leading auto companies are scrambling to grab a slice of China’s booming new vehicle sector.
  • EV makers from home-grown NIO to Elon Musk’s Tesla have been rapidly expanding in the country 
  • German firms such as Volkswagen and Daimler are also ramping up electric vehicle production.
  • China is the world’s biggest auto market with more than 20 million vehicles sold annually.
  • Ford sold 602,627 vehicles in China last year, a rise of 6% compared to 2019.  

What was said: “The positive results reflect the company’s favorable product mix that more strongly aligns with Chinese consumers’ preferences for SUVs and luxury vehicles. The company’s refreshed portfolio of offerings includes several new vehicles such as the Ford Explorer and Escape, as well as the Lincoln Corsair and Aviator,” Ford said in a statement after announcing its results in China last month.