China’s state broadcaster has implicated Jack Ma’s Ant Group in a corruption scandal, increasing pressure on the billionaire following a crackdown that wiped billions of dollars from his internet empire.
A documentary on state-owned China Central Television alleged that private companies made ‘unreasonably high payments’ to the brother of China’s former Communist Party leader in Hangzhou, an eastern city that hosts the headquarters of the Ant Group, in exchange government policy incentives and support for the purchase of real estate.
According to public records and two sources familiar with the deals, a unit of Ant Group bought two discounted plots of land in Hangzhou in 2019 after taking stakes in two mobile payment companies owned by the younger brother of the party secretary who were named in the documentary. .
Although the documentary does not name Jack Ma’s company, the Ant unit was the only outside corporate investor in one of these companies, according to public records, and was among three corporate investors in the second.
“The nature of such a transfer of interests is an exchange of power and capital,” said the documentary, produced by the Communist Party’s Central Commission for Discipline Inspection. The material broadcast by the Chinese state broadcaster represents the official party line.
The program has intensified pressure on Ant, as the fintech group with more than a billion users scrambles to overhaul its business to comply with authorities’ demands. Chinese regulators halted a $37 billion initial public offering the company planned for 2020 and forced it to restructure.
Ant suffered a setback in its government-led reform efforts last week after a state-owned asset manager pulled out of a deal to invest in the fintech’s lending arm without explanation. .
The documentary alleged that Zhou Jiangyong, the former Hangzhou party secretary arrested in August on corruption charges, helped unidentified companies acquire cheap land and benefit from preferential policies after buying shares in government-controlled companies. younger brother of senior official Zhou Jianyong.
Young Zhou, a former business school professor, started Youcheng United (Ningbo) Information Technology Development Co in 2016, winning contracts to build subway mobile payment systems in the coastal hubs of Ningbo and Wenzhou, according to the documentary. At the time, his brother was the party secretary of those towns.
“He won the case because I was a government official,” Zhou, the former party secretary, said of his brother in the documentary.
Ant made a series of deals with young Zhou. Public records show that Shanghai Yunxin Venture Capital Management Co, a subsidiary of Ant, paid Rmb1.7 million ($268,000) for a 14.3% stake and a seat on the board of Youcheng United ( Ningbo) in March 2019.
Later that year, Shanghai Yunxin spent Rmb1.4 million ($221,000) to buy a 13.5% stake in a Hangzhou-based subway payment provider owned by junior Zhou and featured in the documentary, public records show. The Hangzhou company also includes a public company as an investor.
Less than a year after Ant made the second investment, the fintech group won an auction for land in Hangzhou for Rmb5,194 ($819) per square meter as the only qualified bidder, according to land auction records. . Average house prices in the neighborhood exceed Rmb45,000 ($7,100) per square meter, according to real estate websites.
In the documentary, the brother of the former party secretary claimed that he charged a high price for investments in his businesses.
“Of course you know that I am Zhou Jiangyong’s brother,” Zhou Jianyong said in the documentary. “You can imagine the price I raised. 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.
“Ant’s rise and fall epitomizes the unequal relationship between business and politics in China,” said Nie Huihua, a professor at Renmin University in Beijing.
Ma has kept a low profile as Ant and his e-commerce group Alibaba battle mounting political pressure as Chinese President Xi Jinping embarks on a ‘common prosperity’ drive to reshape the country’s business and political landscape. .
“Ant’s rise has a lot to do with its ability to curry favor with local authorities,” a person close to the fintech group said. “He can now pay the price.”
After the documentary aired, the Communist Party’s anti-corruption commission said it would step up oversight of the country’s biggest internet companies “to cut the link between power and capital”.