Jack Ma rails against global financial rules ahead of US$30 billion Ant Group IPO

Alibaba founder Jack Ma has blasted international financial regulations and said China needs to chart its own path, days before Ant Group launches the world’s biggest initial public offering.

“The Basel Accords are like an
old people’s club . . . we can’t use yesterday’s methods to regulate the future,” Ma said at a conference in Shanghai on the weekend, referring to the international banking supervision framework.

Ma said the challenges that the rules were designed to resolve were not relevant to China’s phase of development.

“Many of the world’s problems” stemmed from “only talking about risk control, not talking about development, not thinking about young people’s or developing countries’ opportunities”, he said.

The dual listing in Hong Kong and Shanghai of Ant, the financial services group, is expected to raise at least US$30 billion, in an IPO that would top the previous record of US$29.4b raised in 2019 by Saudi Aramco, the state-owned oil company.

The Chinese group is controlled by Ma, who has kept a low profile since retiring from his position as chair of Alibaba in 2019. Ant has been valued at US$318b by some analysts and Ma has pledged to reduce his direct and indirect stakes to 8.8 per cent.

Ant runs Alipay, one of China’s two biggest mobile payment platforms, as well as a host of fintech services including the Sesame Credit personal credit rating system.

China has roughly 460 million people without formal bank credit histories. Small and medium-sized enterprises have struggled to obtain loans from the traditional banking sector, which is dominated by big state-owned banks that like to lend to large companies and state-owned groups.

Ma said the financial system should rely less on big banks and more on an ecosystem of “lakes, ponds, streams and brooks” that carries capital into the different corners of economy.

He also urged moving away from a “pawnshop” mentality of banks taking collateral for loans and towards credit-ratings based on big data. The Basel Accords require banks internationally to keep sufficient collateral to absorb potential losses.

Ant has expanded its Sesame Credit scheme to give users with good scores collateral-free access to everything from shared apartments to umbrella rental.

But while Ant’s platforms encompass a diverse range of consumer behaviours that provide useful data, its own experts have questioned the success of Sesame Credit for predicting loan repayment rates. The company has mostly stuck to traditional banking data for making lending decisions.

The People’s Bank of China, the central bank, has also run into problems when trying to set up its own nationwide alternative credit-scoring company, called Baihang. The biggest sources of fintech user data — Tencent and Ant Group — have previously refused to share it with Baihang.

On Sunday, local media reported that Ant Group had bought a Rmb2.7b plot of land to build another office building in Hangzhou, the city where the group is headquartered.

The purchase is seen as evidence of Ant’s planned expansion as well as its deep pockets: the company earned Rmb18b (US$2.6b) in profits last year.

*The article has been updated to include the final amount raised by Saudi Aramco after it exercised the greenshoe option on its IPO.