The Indicator from Planet Money - Ant's IPO Woes

Ant Group is a fintech firm that was set to launch with the world's largest ever IPO. But just before its shares started trading, Chinese regulators pulled the plug. NPR's Emily Feng explains why.

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everyone is Cardiff. This is the indicator from Planet Money so much has been happening here in the US lately that you might have missed this big story playing out in China and joining me today to tell that story all the way from Beijing is NPR's Beijing correspondent. Emily Fang Emily. Hi. Hey Cardiff. This story is about the tension between the Chinese government and a huge Chinese financial services company called Aunt group. So why do you just start there by explaining? What and Croup is it is a financial One Stop Shop people use it to pay for goods online. I used to pay for my groceries in my restaurant bill. For example, you can use it to invest in financial products. You can get a loan through Aunt group and you can even essentially use it as a credit card. So it offers also the financial services that a bank and more would normally offer.

Combine the full Suite of services that I could get just from Aunt group. If I were living in China in China, it's all in this mobile app was planning to do an IPO in initial public offering which just means that the company was planning to sell its shares on the stock markets in Shanghai and Hong Kong and the company was planning to raise more than 34 billion dollars by selling their shares which would have been the biggest IPO in world history for any company anywhere ever and then suddenly the Chinese Regulators Force the company to pull the plug to not do the IPO. And that's the story the story of why they did that which reveals a lot about how the Chinese economy which is the second biggest economy in the world actually operates now differ so much from other economies family. You are going to tell us that story right after a quick break.

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Support for NPR in the following message come from fundrise fundrise makes it easy for anyone to invest in high-quality real estate by building you a portfolio with there more than 1 billion dollars in assets get started at indicator to have your first 90 days of advisory fees waived NPR Beijing correspondent Emily a place to start this story might be with the complicated relationship between Aunt group this massive financial services company and the Chinese banking system the Chinese Banks. So what's going on there Chinese banking system has always been very very state-owned. And in Croup is very much of the private sector Aunt group is also one of the more Innovative Financial players out there and therefore that makes it a competitor to China's financial institutions. So it's regarded with a little bit of Suspicion and distrust but it's also one of the most promising companies to come out of joy

In the last four decades Emily is I understand it and Route as a private company was also taking risks that the bank's overseen by the state would not take like it was being Innovative in lending money online it lend money to people without much credit. And so the company was effectively arrival to the Chinese Banks and therefore also arrival to important people in the Chinese government's well, is that basically right? Yes, it puts them in conflict with the Central Bank of China. So by competing at Chinese banks are going toe-to-toe with the highest level of Communist Party leadership here in China. And on top of that President Xi Jinping has been trying to eliminate risk in the financial system. So he's been really cracking down and how much Banks lend how much debt the accumulate and that includes online lenders like Aunt group. So they're facing a lot of strict regulation these days.

Jack Mars in the 12th Jack ma is the co-founder of and group and he also happens to be one of the richest people in the world worth roughly an estimated fifty billion dollars. So tell us about Jackman and what happened in that speech China's most influential entrepreneur, he basically launch the entire internet-based startup scene. He first lunch with company called Alibaba, which has revolutionized e-commerce World any of this incredibly colorful guy who loves attention. I mean, he's the kind of guy who dances and costumes in front of his employees in an entire 20-minute kung fu movie starring himself.

Which he caved employees and it's highly entertaining and it's up and gives a speech last October and which she says Chinese Regulators are not allowing risk-takers enough space to flourish that the existing banks are strangling the financial system because they cannot handle the transaction is necessary in China these days and number three is at thanks also operate with a pawnshop mentality meaning they're not Innovative or simply taking people's money and not increasing the the size of the pie. There is no other entrepreneur that I can think of these days that would stand up and give a speech essentially giving a policy paper to Chinese Bank Regulators by what they should do what happens after the speech so interesting enough. He also says, you know, and I'm not a financial expert. So whatever I say if you just took

With me you can forget about it. Really so China's Regulators do not forget about this because a few weeks later they call him in a couple of his most trusted lieutenants and they give him a dressing down.

They talk about issues affecting to regulation and the next day and IPO is canceled the Shanghai stock exchange in the Hong Kong Stock Exchange come up with an announcement that there indefinitely suspending Aunt group IPO because of major issues that's a direct quote and certain disclosure failures and that they'll be meeting with Aunt group Executives in the coming days to store at these issues. And so where does that leave and croup and also Emily? Why is it such a big deal that the company was not able to start selling shares on the Shanghai and Hong Kong stock exchanges divorces right now, Jack ma will likely have to restructure its business a bit to make sure that he meets these new draft regulations and then hopefully the IPO go for it because thousands of people have already subscribe to their shares and put their money down. The antiope was such a big deal here and trying to because this was the chance for the Shanghai Boris and the Hong Kong Boris to really shine most Chinese tech companies including Jack laws.

Successful Venture Alibaba listed in New York. That's where most trendy tech companies want to go and the party in China decided that they were willing to sacrifice that moment in the spotlight to demonstrate their control to them that was worth it and only what's interesting about other countries where companies might be protected from certain kinds of government interference by the legal system laws in the courts hear it just kind of seems like the Chinese government's control over companies is something close to Absolute are functioning court systems. There is extensive legislation out there protecting business interests, but the at the end of the day when push comes to shove the party still calls the shots and they can manipulate those legal process is to serve its desired outcome. Finally. It's also interesting that Aunt group is a company that's big and successful technologically quite sophisticated in advance and even envied.

The world because it is but rather than sort of championing the company. The Chinese government is restraining it instead when you get to be that big and that influential with the possibility of becoming a truly multinational company China communist party almost use you as an even more behold into the party because you are such a representative element of the Chinese system that you then must keep in mind everything you do at the end of the day most Earth must have China and the party

This episode of the indicator was produced by Jamila Huxtable and fact-checked by Sean cell. Our editors Patty Hearst and the indicator is a production of NPR.

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