Derailing of Jack Ma's Ant Group IPO shows Xi Jinping is in charge

Decision shows party takes precedence on business decisions

China’s move to abruptly halt the world’s biggest stock-market debut sends global investors a clear message: Any financial opening will only be done on terms that benefit President Xi Jinping and the Communist Party.
 

Policy makers in Beijing shocked the investment world on Tuesday by suspending an initial public offering by Ant Group Co, owned by billionaire Jack Ma — China’s second-richest man. The timing of the decision showed once again that for Xi and the party, financial and political stability take precedence over ceding control of the economy — especially to a private company. In Beijing’s view, allowing the IPO to go forward could effectively give Ant too much sway over the financial system, posing broader risks that could ultimately undermine the party’s grip on power.
 

For foreign investors, the Ant saga has raised questions about the viability of Hong Kong and Shanghai as premium financial centers. That’s particularly so after China last week signalled greater openness in a new five-year plan that put a timeline on moving forward with past promises of allowing greater foreign access and gradually relaxing controls over the yuan and capital flows.
 

Ma’s Risky Speech
 

At a conference in Shanghai on October 24, Ma blamed global regulators for focusing too much on risk, and criticized China’s own measures for stifling innovation. The remarks came after V-P Wang Qishan — a Xi confidante — called for a balance between financial innovation and strong regulations to prevent financial risks. “It appeared that, intentionally or not, Ma was openly defying and criticising the Chinese government’s approach to financial regulation,” Andrew Batson, China research director, Gavekal Research, wrote in a note.
 

‘Strings Pulled’
 

For global investors, however, the episode is likely to reinforce the notion that the party calls all the shots when it comes to major business decisions — and any opening measures will be carefully calibrated for the impact on the Communist Party.