Chinese regulators on Friday fined Ant Group almost $1 billion, lifting shares in Alibaba, which owns a third of the fintech company. The penalty brings short-term pain, but hints at a brighter future for the whole Chinese tech sector.
Alibaba’s (ticker: BABA) Hong Kong-listed stock gained as much as 6.4% on Friday after Reuters reported that the penalty was coming. The U.S.-listed stock was recently up 5.8% in New York trading after China’s central bank and the country’s securities regulator confirmed the 7.123 billion yuan ($990 billion) fine for Ant Group, among the largest ever for a Chinese tech company.
Regulators said part of the fine included confiscation of illegal income, based on a statement published in Chinese and translated with software by Barron’s. Authorities alleged, among other things, that Ant broke rules when conducting banking, insurance, payment, and settlement business in the past, and had issues with corporate governance and anti-money-laundering obligations, the statement said.
While such a fine for Ant Group bites, it actually bodes well for the company, as well as Alibaba and tech peers such as JD.com (JD), because it signals that almost three years of regulatory pressure on the sector are drawing to a close.
Chinese authorities began a brutal crackdown on the country’s fast-growing tech sector in late 2020 by scuttling Ant’s hotly anticipated initial public offering—a move that ushered in a stock market rout, which wiped away billions of dollars of value from China tech stocks.
The Ant penalty from regulators should pave the way for the group to move forward—and possibly even go public.
It is another symbolic development from Beijing that the tech sector is free to continue its streak of red-hot growth—albeit now in a macro environment in which the world’s second-largest economy is facing a slowdown. That should lift some of the overhang from shares in Alibaba, which lost almost half their value in 2021 alone and in 2023 trade at less than a third of their 2020 peak.