Ant Group, the online finance affiliate of the Chinese e-commerce giant Alibaba, announced a sweeping overhaul of its business on Monday in response to demands from China’s government, which had accused the company of flouting regulations in its quest for growth.
As part of what the company and officials called a “rectification plan,” Ant said it would apply to set up as a financial holding company, which would subject it to new supervision and capital requirements in ways that could crimp its profitability.
It said it would change the way it collects and uses personal information to improve data security and prevent abuse. And it said it would improve corporate governance to better adhere to rules about fair competition.
“Under the guidance of financial regulators, Ant Group will spare no effort in implementing the rectification plan,” the company said in a statement. “Using the rectification as an opportunity, Ant Group will reinforce our commitment to serve consumers, small businesses and the real economy.”
Beijing has been moving swiftly to curb what it describes as unfair business practices by the country’s powerful internet giants. And it has taken the corporate empire of Jack Ma, Alibaba’s billionaire co-founder and Ant’s controlling shareholder, as an early major target.
On Saturday, China’s antitrust authority fined Alibaba $2.8 billion for abusing its dominance in digital retail — a record fine for violations of the country’s antimonopoly law.
Chinese officials forced Ant to call off its blockbuster initial public offering last November, mere days before its shares had been expected to debut. A month later, regulators ordered Ant to correct what they called a litany of failings in its business, which includes a range of financial services, from payments to credit, that are offered through its Alipay app.
Alipay’s user base of more than 700 million people in China gives Ant huge sway within the country’s financial system.
China first said last September that companies owning two or more financial businesses would have to register as financial holding companies and be subject to increased government oversight. In a news briefing at the time, an official at China’s central bank named Ant as one of several companies that would likely have to restructure under the new rules.
The aim, officials said, is to better monitor systemic risks that have arisen as more nonfinancial companies have “blindly” entered the financial industry.