Ant Group and China's State Banks: Partners, Rivals, or Both?

Among the many Chinese Fintech companies, Ant Group has been a leading player in the market, used almost universally on the mainland and hailed internationally as a sign of China’s uniquely innovative financial technology. Its long-awaited IPO had raised $34.5 billion; valued at an astounding $313 billion, it was set to list as the world’s largest in history, and was considered proof of the mainland’s truly global capital markets. Despite the good press for China’s financial sector, on November 3, 2020 the IPO listing was halted by Chinese regulators, just two days before its debut. It was a startling reminder that China’s markets, despite their Western characteristics, are still confined within the bounds of a state-run economy.

The sudden implementation of strict regulations on Ant’s activities was nothing new: before the 2020 crackdown on their consumer loans arm, or CreditTech division, Ant Group’s Yu’e Bao—the money market fund within their InvestmentTech services—had come under fire from financial regulatory bodies in 2018. How did this Fintech company become so large that it posed a threat to the State not just once, but twice?

Weak points within China’s financial system both enabled Ant Group to reach historic heights and begot its precipitous decline. While Ant Group’s operations were certainly beneficial for some aspects of the economy, the company was also a source of competition to traditional banks, and posed significant risks to the stability of China’s financial system. This study examines how Ant’s CreditTech and InvestmentTech arms negatively impacted the Big 4 state banks’ access to individual deposits, exacerbated the riskiness of smaller commercial banks, and created the potential for a series of massive consumer loan defaults through targeting a historically present financing gap.