Jack Ma’s Ant Group embroiled in corruption scandal by Chinese media

China’s state broadcaster has implicated Jack Ma’s Ant Group in a corruption scandal, putting more pressure on the billionaire after a multibillion-dollar crackdown on his internet empire.

A CCTV documentary said private companies paid “unreasonably high sums” to the brother of the former Communist Party chief in Hangzhou, where Ant Group is headquartered, in exchange for government policy incentives and support for real estate purchases.

A subsidiary of Ant Group bought two parcels of land in Hangzhou at a discount in 2019 after taking stakes in two mobile payment businesses owned by the younger brother of the party secretary mentioned in the documentary, according to public records and two sources close to the deal. . .

While the documentary did not name Jack Ma’s company, Ant Group was the only outside corporate investor in one of the businesses and one of three corporate investors in the second, according to public records.

“The essence of this transfer of interests is the exchange of power and capital,” said a documentary produced by the Communist Party’s Central Commission for Discipline Inspection. The material broadcast by China’s National Broadcasting Corporation represents the official line of the party.

As a fintech group with more than 1 billion users, the plan increases pressure on Ant Effort overhaul its business to comply with the requirements of the authorities. Chinese regulators canceled the company’s planned $37 billion initial public offering in 2020 and forced it to restructure.

Last week, Ant Group’s government-led reform efforts suffered a setback after a state-owned asset management company exit the deal Investing in the lending sector of fintech without explanation.

According to the documentary, Zhou Jiangyong, the former secretary of the Hangzhou Municipal Party Committee Arrested in August For corruption, after helping an unidentified company acquire shares in a company controlled by Zhou Jianyong, the brother of a senior official, he obtained cheap land and enjoyed preferential policies.

Xiao Zhou, a former business school professor, founded Youcheng United (Ningbo) Information Technology Development Co., Ltd. in 2016, winning contracts to build a subway mobile payment system at coastal hubs in Ningbo and Wenzhou, the documentary said. At the time, his brother was the party secretary of these cities.

“He won the business because I was a government official,” Zhou, the former party secretary, said of his brother in the documentary.

Ant has struck a series of deals with Xiao Zhou. In March 2019, Ant Financial’s subsidiary Shanghai Yunxin Venture Capital Management Co Ltd bought a 14.3% stake in Youcheng United (Ningbo) and a board of directors for 1.7 million yuan ($268,000), public records show. seats.

Shanghai Yunxin paid 1.4 million yuan ($221,000) for a 13.5 percent stake in the Hangzhou metro payment provider later this year, public records show. The Hangzhou company also includes a state-owned enterprise as an investor.

Land auction records show that less than a year after Ant made its second investment, the fintech group was the only eligible bidder for a site in Hangzhou at 5,194 yuan ($819) per square metre By. According to the real estate website, the average house price in the neighborhood is more than 45,000 yuan ($7,100) per square meter.

In the documentary, the younger brother of the former party secretary said he charged high prices for investments in his company.

“Of course you know that I am Zhou Jiangyong’s younger brother,” Zhou Jianyong said in the documentary. “You can imagine the price I’m offering. You want to take advantage of me. Shouldn’t I do the same to you?”

Ant Group did not respond to a request for comment. The Financial Times could not reach the Zhou brothers for comment.

“The rise and fall of Ant Financial reflects the unequal relationship between business and politics in China,” said Nie Huihua, a professor at Renmin University in Beijing.

Started by Chinese President Xi Jinpingcommon prosperity” campaign to radically change the country’s business and political landscape.

“The rise of Ant Financial has a lot to do with its ability to please local officials,” said a person close to the fintech group. “It could now pay for it.”

After the documentary aired, the Chinese Communist Party’s Anti-Corruption Commission said it would strengthen supervision of China’s largest Internet company to “cut off the link between power and capital.”

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