China's Ant Group may be added to US trade blacklist

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WASHINGTON • The US State Department has submitted a proposal for the Trump administration to add China’s Ant Group to a trade blacklist, according to two people familiar with the matter, before the financial technology firm is slated to go public.

The move comes as China hardliners in the Trump administration are seeking to send a message to deter US investors from taking part in the initial public offering (IPO) for Ant, a dual listing in Shanghai and Hong Kong that could be worth up to a record US$35 billion (S$47.6 billion).

It was not immediately clear when the US government agencies that decide whether to add a company to the so-called entity list would review the matter.

The latest swipe at China comes in the run-up to the Nov 3 election, in which US President Donald Trump, trailing in the polls against his Democratic rival Joe Biden, has made a tough approach to China an important foreign policy platform.

While the Alipay payment app is currently unavailable for American users in the United States, according to a spokesman for Ant, Trump administration officials fear the Chinese government could access sensitive banking data belonging to future US users.

The US State Department did not respond to a request for comment.

Ant, an affiliate of Alibaba Group, declined to comment but has recently stressed that only 5 per cent of its business is outside China.

“China opposes the US abusing the concept of national security and its national power to oppress foreign countries. This is a bullying practice,” Chinese Foreign Ministry spokesman Zhao Lijian said during a regular briefing yesterday.

“China will continue taking necessary measures to safeguard the legitimate rights and interests of Chinese companies.”

The entity list, which makes it more difficult for US firms to sell high-tech items to blacklisted companies, has become the tool of choice for the Trump administration to punish Chinese companies, though its real-world impact is sometimes questionable.

While curbing access to US technology deals a blow to firms like Chinese telecoms giant Huawei Technologies, which was added in May last year, the impact on a fintech giant such as Ant is likely to be more symbolic and does not prevent US investors from taking stakes in it.

Ant is China’s dominant mobile payments firm, offering loans, payments, insurance and asset management services via apps. It is 33 per cent owned by Alibaba and controlled by Alibaba founder Jack Ma.

Ant’s Alipay payment platform, like Tencent’s WeChat platform, is used primarily by Chinese citizens with accounts in renminbi. Most of its US interactions are with merchants accepting payment from Chinese travellers and businesses in the country.

Senator Marco Rubio, who has successfully urged the Trump administration to pursue investigations of Chinese companies, called last week for the US government to consider options to delay Ant’s IPO.

The impact of such blacklisting on firms seeking an IPO is evidenced by the failure of Chinese artificial intelligence firm Megvii Technology to clear a hearing with the Hong Kong exchange last November, en route to a planned listing of US$500 million.

The exchange sought more information from Megvii, including details of its suitability for a Hong Kong IPO, after the US put it on a trade blacklist in October last year.

Approval for Ant’s IPO has been delayed. On Tuesday, Reuters reported that China’s securities regulator is probing a potential conflict of interest in Ant’s planned stock listing.

REUTERS

A Global Asset Management Seoul Korea Magazine

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