US Senate Bill Aims for More Financial Restrictions on China. Here’s How That Could Play Out.

The bill would prohibit them from being listed or traded on U.S. exchanges and would also bar U.S. investment companies—including index funds and …

The proposed bill, known as the American Financial Markets Integrity and Security Act and co-sponsored by Rubio and Sen. Mike Braun (R.,IN), would cut these companies off from U.S. capital markets in a couple of ways. The bill would prohibit them from being listed or traded on U.S. exchanges and would also bar U.S. investment companies—including index funds and mutual funds—insurance companies and retirement funds—from investing in them.

There are a number of Chinese companies on the Commerce Department’s so-called entity list or the Pentagon’s list of companies the U.S. says are backed by the military, including some involved in human rights abuses in Xinjiang. Companies targeted by this proposed legislation include China Mobile Communications Group, which controls China Mobile (CHL), China Telecommunications Corp., which owns China Telecom (CHA), and surveillance camera maker Hangzhou HIK Vision Digital Technology (2415.China), according to a statement released by Rubio’s office. Shares of China Mobile were down slightly, 0.70%, at $32.49, while shares of China Telecom were up 3% at $33.52.

The proposed bill would “make clear to the Communist Party that they will no longer be able to exploit our financial system,” Rubio said in a statement.

It’s the latest legislative attempt toward a decoupling from China. In May, the Senate passed a bill to delist Chinese companies from exchanges if they didn’t follow U.S. auditing rules. Many of the more widely held Chinese companies listed in the U. S.—like Alibaba Group Holding (BABA), JD.com (JD) and NetEase (NTES)—have sought secondary listings in Hong Kong, and fund managers have been swapping into these listings, even though any delisting push could take time to play out.

In terms of dollars, the amount of money at stake in the proposed legislation is tiny, but the bill represents “an important rule of law issue,” said Derek Scissors, a resident scholar focused on China at the American Enterprise Institute, who has made the case for a partial decoupling from China in the past. “Sen. Rubio has worked this for several years, but been blocked by Republican opposition at Senate Banking and Treasury,’ Scissors said. “If the Senate or administration changes hands, action is much more likely.”

For now, investors have played down the risk of being cut off from investing in China, at least in the near-term, and have had relatively muted reactions to many China-related proposals from the Administration.

But while some of those proposals done through executive orders, like a threatened ban against Tencent Holdings ’ WeChat and ByteDance’s TikTok, are in limbo, analysts see a bipartisan willingness in Congress to take a tougher stance on China. “The mood in Washington is pretty hostile on China and is bipartisan,” said Greg Valliere, chief U.S. Policy Strategist at AGF Investments, at a digital presentation at the Schwab IMPACT conference on Tuesday. “There is going to be a freeze [in the relationship], even if it isn’t a deep freeze.”

The move toward a decoupling of sorts has momentum in China, as well. Increasingly, Chinese companies are seeking listings closer to home as tensions between the U.S. and China flare and Beijing increases its focus on bolstering its domestic economy. The clearest example of a Chinese company bypassing the U.S.: The coming dual offering by fintech giant Ant Group in Hong Kong and Shanghai, which is expected to raise $34 billion, making it the world’s biggest initial public offering.

Corrections & Amplifications

Greg Valliere is chief U.S. Policy Strategist at AGF Investments. An earlier version of this article incorrectly identified the full name of the company.

Write to Reshma Kapadia at reshma.kapadia@barrons.com

Benzinga’s Top Upgrades, Downgrades For October 27, 2020

Morgan Stanley upgraded the previous rating for Diamondrock Hospitality Co (NYSE: DRH) from Underweight to Equal-Weight. Diamondrock …
South China Morning Post

What is Jack Ma’s Ant Group and how does it make money?

Digital financial services giant Ant Group is on the cusp of pulling off the world’s biggest initial public offering and could be worth over US$500 billion in the near future, riding on the digitisation of financial services in the world’s second-largest economy.Hangzhou-headquartered Ant’s coming out parade illustrates China’s lead in digital finance. Its super-slick mobile payment app, Alipay, has over 1 billion users, making it the world’s most popular app outside social-media networks.Ant’s payments network is just the gateway, funnelling small businesses and consumers into a broad financial ecosystem spanning lending, investment and insurance services.Get the latest insights and analysis from our Global Impact newsletter on the big stories originating in China.The world’s most valuable privately owned company is also developing services to make daily life easier. Consumers can click on the Alipay app for services ranging from food deliveries to garbage collection.The system’s cogs are oiled by a trove of data gathered in China, the world’s most populous country, which makes pricing more accurate and efficient than at traditional banks.Ant plans to plough the US$34.5 billion it is raising from dual listings in Hong Kong and Shanghai into future revenue drivers, such as blockchain, growth outside China and merchant services.In this explainer, we take a look at the growth potential of Ant’s key businesses and why the company could soon be worth more than the world’s largest bank, JPMorgan Chase.”We believe that if we can enable ordinary people to enjoy the same financial services as the bank CEO and help mom and pop shops to obtain growth financing as easily as big firms, then we will be a company that belongs to the future,” Eric Jing, Ant’s executive chairman, said in the company’s prospectus.What is Ant?Ant traces its origins back to 2004, when Chinese e-commerce giant Alibaba Group Holding created Alipay to bridge a lack of trust between buyers and sellers in the early days of online shopping in mainland China.In 2011, Alibaba, the owner of the Post, spun off Alipay, so that it could apply for a payment business licence in mainland China. That company, then known as Zhejiang Alibaba E-Commerce Company, changed its name to Ant Financial and eventually morphed into Ant Group.Ant reported revenue of 118.19 billion yuan (US$17.7 billion) in the nine months ended September, a 43 per cent increase over the same period in 2019.It dwarfs Palo Alto-based PayPal’s user base of PayPal, which had 346 million active accounts as of June 30 and is the largest digital payments platform outside China. PayPal generated revenue of US$12.8 billion in the first nine months of 2019 and US$9.88 billion in the first half of this year.Ant sees further room for growth as China’s digital payments transaction volume is expected to increase to 412 trillion yuan by 2025, from 201 trillion yuan last year, according to consultancy iResearch. The compound annual growth rate in Ant’s annual active users was 15 per cent between 2017 and 2019.Alibaba co-founder Jack Ma is a controlling shareholder of Ant Group and will retain his voting rights after the company’s IPO. Photo: AP alt=Alibaba co-founder Jack Ma is a controlling shareholder of Ant Group and will retain his voting rights after the company’s IPO. Photo: APWhat are Ant’s key businesses?Ant is cross-selling and upselling higher-value financial products to users of its payments network and sees engagement with its customers growing tenfold in the coming five years.Ant acts as a lending, investment and insurance products platform for individuals and underserved small businesses. Its revenue per user is just 121 yuan, still small compared with traditional financial institutions.Digital financial services contributed more than half of Ant’s overall revenues in the six months ended June 30.Its largest business is now what it has dubbed CreditTech, providing credit to consumers and small businesses, surpassing payments and generating 39.4 per cent of its revenue in the six months ended June 30.Ant is the largest online provider of microfinance services in China in terms of total outstanding credit balance originated through its platform, according to consultancy Oliver Wyman.Management likens China’s banks to the arteries of the economy, financing growth. They see Ant as the capillaries that transmit funds to the extremities of the economy, small businesses and individuals.Ant originates loans, 98 per cent of which are then underwritten by financial institutions or securitised. As of June 30, it was working with about 100 banks, including all policy banks, large national state-owned banks, all national joint-stock banks, leading city and rural commercial banks, international banks that operate in China, as well as trust companies.Its platform takes just three minutes to process a loan and 1 second to disburse the loan, with zero human intervention.The consumer credit and small business credit balance in China could swell to 50 trillion yuan by 2025, and Ant has only tapped about 4 per cent of this huge market so far.In investment services, Ant has partnered with 170 asset managers, as well as banks and insurers, to provide wealth management products to its customers. As of June 30, the so-called InvestmentTech segment had 4.1 trillion yuan in assets under management sold through Ant’s platform.The insurance business also is a growing segment, accounting for 8.4 per cent of its revenue in the six months ended June 30.Ant is the largest online insurance services platform in China in terms of premiums generated, according to Oliver Wyman. It has relationships with about 90 insurers in the mainland, representing about 52 billion yuan in premiums generated and contributions through its online mutual-aid platform Xiang Hu Bao in the twelve months ended June 30.China’s online insurance premiums will hit 1.9 trillion yuan by 2025 at a CAGR of 38.1 per cent, said Oliver Wyman. Ant’s premiums are still under 1 per cent of this fast-growing pie.QR codes for WeChat Pay (left) and Alipay, whcih dominate the mobile payments market in China. Photo: Reuters alt=QR codes for WeChat Pay (left) and Alipay, whcih dominate the mobile payments market in China. Photo: ReutersHow does Ant compare with Tencent Holdings?Alipay and Tencent’s WeChat Pay command a virtual duopoly in China’s mobile payments, which accounted for US$15.9 trillion in transactions in the second quarter, according to the most recent data from the People’s Bank of China.There were 30.1 billion mobile transactions alone in the mainland in the second quarter, a 26.9 per cent increase over the year-earlier period.The two players had an aggregate market share of 90 per cent of third-party mobile payments in China at the end of last year, according to Mizuho Securities.It is difficult to directly compare Alipay to Tencent’s WeChat Pay as Hong Kong-listed Tencent does not break them out separately but WeChat Pay is included in its fintech and business services division.In 2019, Alipay generated a higher average transaction size – 483 yuan versus 183 yuan at Tencent’s payment affiliate Caifutong, according to Morningstar analysts. Ant also generated a gross margin nearly double that of Tencent’s fintech business last year.Other differences also remain between their payments businesses. Not least, WeChat Pay is integrated into WeChat while Alipay is a stand-alone app, linked to consumers’ bank accounts.A figurine of Ant’s mascot sits on a desk at the company’s headquarters in Hangzhou. Photo: Bloomberg alt=A figurine of Ant’s mascot sits on a desk at the company’s headquarters in Hangzhou. Photo: BloombergWhat are Ant’s emerging growth drivers?Future revenue drivers include Ant’s blockchain business, dubbed Antchain, as well as international expansion and merchant services.Ant started to explore blockchain’s potential around six years ago and has been investing in the technology ever since. It has taken the lead globally in terms of technical capability and developed around 50 commercial applications.In March, Simon Hu, Ant’s chief executive, released a three-year plan to open up Alipay as an online gateway for businesses ranging from retailers to hotels, working with 50,000 independent software vendors to digitally upgrade 40 million merchants.Ant’s management predicts that the 80 million small businesses it serves today will swell to 163 million by 2025.Analysts sent research to investors on Wednesday pegging Ant’s near-term valuation roughly between US$350 billion and US$450 billion on a like-for-like basis, including the money it is raising in the IPO, according to people familiar with the matter.On a different time frame, JPMorgan analysts are particularly bullish on future growth potential and estimated Ant’s market capitalisation would swell to north of US$500 billion post-money.Credit Suisse analysts peg Ant’s valuation between US$380 billion and US$461 billion, with a price/earnings to growth ratio between 1.2 times and 1.4 times. They forecast Ant’s net profit will hit 56 billion yuan (US$8.4 billion) in 2021 and 75 billion yuan in 2022.Ant Bank is a virtual banking arm of Ant in Hong Kong. Photo: Handout alt=Ant Bank is a virtual banking arm of Ant in Hong Kong. Photo: HandoutHow big is Ant outside mainland China?Mainland China accounted for 95.6 per cent of Ant’s revenue for the six months ended June 30, and most of its revenue from outside China was from cross-border payment services.But, Ant and other payment providers are seeking to expand internationally and diversify domestically as the third-party mobile payment industry has become saturated in China in terms of the number of users.”Future opportunities would lie in cross-border payment, inbound tourism and overseas markets,” said Ben Huang, an analyst at Mizuho Securities.Ant has been expanding overseas for the past decade and is now present across the Asia-Pacific region and in Chinese tourist hotspots globally.It had forged partnerships with local partners in Bangladesh, Hong Kong, India, Indonesia, Korea, Malaysia, Pakistan, the Philippines and Thailand as of March 31.Ant also won a virtual bank license in Hong Kong and is applying for one in Singapore.Alipay’s in-store payment service is in more than 50 markets globally. Alipay supports 27 currencies and works with over 250 overseas financial institutions and payment solution providers to enable cross-border payments for Chinese travelling overseas, and overseas customers who purchase products from Chinese e-commerce sites.Ant is seeking to expand into products beyond payments as part of its growth strategy. Photo: Reuters alt=Ant is seeking to expand into products beyond payments as part of its growth strategy. Photo: ReutersDo rising US-China tensions present a risk to Ant’s business?Ant’s business in the US is “negligible”, but the company warned the worsening relationship between the world’s biggest economies had raised concerns the US may impose “increased regulatory challenges or enhanced restrictions” on Chinese companies.Two years ago, Ant’s US$1.2 billion deal to acquire money transfer firm Moneygram International fell apart after a US government panel rejected the transaction over national security concerns.Bloomberg reported this month that the US was considering potential actions against Tencent and Ant over their payment apps. Reuters also reported the US State Department submitted a proposal to blacklist Ant by adding it to the so-called entity list, which restricts the sale of certain technology.Citing potential risks to its outlook, Ant said that restricted items compromise an “immaterial” portion of its technology and software, but any such restrictions could “materially and adversely” affect its ability to acquire technologies that may be critical to its business and impede its ability to access US-based cloud services or operate in the US.”In addition, these policies and measures directed at China and Chinese companies could have the effect of discouraging US persons and organizations to work for, provide services to or cooperate with Chinese companies, which could hinder our ability to hire or retain qualified personnel and find suitable partners for our business,” Ant said in its prospectus.What is the relationship between Alibaba and Ant today?Alibaba, which owns the Post, and Ant remain closely intertwined despite Alipay being spun off in 2011, a huge competitive advantage for the digital financial services group.Billionaire Jack Ma holds a controlling shareholder of Ant and the co-founder and former executive chairman of Alibaba. Ma controls 50.52 per cent of Ant’s shares.Within Alibaba’s so-called walled garden, about 70 per cent of the gross merchandise volume generated by its marketplaces in China was settled through Alipay in the twelve months to March 31.Alibaba also pays Alipay a fee, on favourable terms to Alibaba, for payment services to its consumers and merchants. In the financial year 2020, those service fees were 8.7 billion yuan.In February 2018, Alibaba, through its subsidiaries, took a 33 per cent equity stake in Ant, which it still holds. Alibaba has subscribed to Ant shares to prevent the IPO from diluting its stake.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.

China retaliates against news media in latest feud with US

… finances, operations and real estate in China within seven days. The announcement came five days after U.S. Secretary of State Mike Pompeo said …

BEIJING — China has ordered six U.S.-based news media to file detailed information about their operations in China the latest volley in a monthslong battle with the Trump administration.

A foreign ministry statement issued late Monday demanded that the bureaus of ABC, The Los Angeles Times, Minnesota Public Radio, the Bureau of National Affairs, Newsweek and Feature Story News declare information about their staff, finances, operations and real estate in China within seven days.

The announcement came five days after U.S. Secretary of State Mike Pompeo said six Chinese media would have to register as foreign missions, which requires them to file similar information with the U.S. government.

The six were the third group of Chinese media required to do so this year. Each time, China has responded by forcing a similar number of U.S. media to file about their operations.

The ministry statement said China was compelled to take the step “in response to the unreasonable oppression the Chinese media organizations experience in the United States.”

Pompeo, in making his announcement, said the targeted Chinese media are state-owned or controlled, and that the U.S. wants to ensure that “consumers of information can differentiate between news written by a free press and propaganda distributed by the Chinese Communist Party.”

The media is one of several areas of growing tension between the two countries as the Trump administration ramps up pressure on China over trade, technology, defence and human rights.

The U.S. ordered the closing of the Chinese consulate in Houston earlier this year, and China responded by shuttering the U.S. consulate in the southwestern city of Chengdu.

The Associated Press

Altus Group Report Reveals Property Tax Burden a Continued Pressure Point for Businesses …

While Vancouver and Calgary reduce property tax burden for businesses, … the differing tax ratios between commercial and residential properties.
South China Morning Post

What is Jack Ma’s Ant Group and how does it make money?

Digital financial services giant Ant Group is on the cusp of pulling off the world’s biggest initial public offering and could be worth over US$500 billion in the near future, riding on the digitisation of financial services in the world’s second-largest economy.Hangzhou-headquartered Ant’s coming out parade illustrates China’s lead in digital finance. Its super-slick mobile payment app, Alipay, has over 1 billion users, making it the world’s most popular app outside social-media networks.Ant’s payments network is just the gateway, funnelling small businesses and consumers into a broad financial ecosystem spanning lending, investment and insurance services.Get the latest insights and analysis from our Global Impact newsletter on the big stories originating in China.The world’s most valuable privately owned company is also developing services to make daily life easier. Consumers can click on the Alipay app for services ranging from food deliveries to garbage collection.The system’s cogs are oiled by a trove of data gathered in China, the world’s most populous country, which makes pricing more accurate and efficient than at traditional banks.Ant plans to plough the US$34.5 billion it is raising from dual listings in Hong Kong and Shanghai into future revenue drivers, such as blockchain, growth outside China and merchant services.In this explainer, we take a look at the growth potential of Ant’s key businesses and why the company could soon be worth more than the world’s largest bank, JPMorgan Chase.”We believe that if we can enable ordinary people to enjoy the same financial services as the bank CEO and help mom and pop shops to obtain growth financing as easily as big firms, then we will be a company that belongs to the future,” Eric Jing, Ant’s executive chairman, said in the company’s prospectus.What is Ant?Ant traces its origins back to 2004, when Chinese e-commerce giant Alibaba Group Holding created Alipay to bridge a lack of trust between buyers and sellers in the early days of online shopping in mainland China.In 2011, Alibaba, the owner of the Post, spun off Alipay, so that it could apply for a payment business licence in mainland China. That company, then known as Zhejiang Alibaba E-Commerce Company, changed its name to Ant Financial and eventually morphed into Ant Group.Ant reported revenue of 118.19 billion yuan (US$17.7 billion) in the nine months ended September, a 43 per cent increase over the same period in 2019.It dwarfs Palo Alto-based PayPal’s user base of PayPal, which had 346 million active accounts as of June 30 and is the largest digital payments platform outside China. PayPal generated revenue of US$12.8 billion in the first nine months of 2019 and US$9.88 billion in the first half of this year.Ant sees further room for growth as China’s digital payments transaction volume is expected to increase to 412 trillion yuan by 2025, from 201 trillion yuan last year, according to consultancy iResearch. The compound annual growth rate in Ant’s annual active users was 15 per cent between 2017 and 2019.Alibaba co-founder Jack Ma is a controlling shareholder of Ant Group and will retain his voting rights after the company’s IPO. Photo: AP alt=Alibaba co-founder Jack Ma is a controlling shareholder of Ant Group and will retain his voting rights after the company’s IPO. Photo: APWhat are Ant’s key businesses?Ant is cross-selling and upselling higher-value financial products to users of its payments network and sees engagement with its customers growing tenfold in the coming five years.Ant acts as a lending, investment and insurance products platform for individuals and underserved small businesses. Its revenue per user is just 121 yuan, still small compared with traditional financial institutions.Digital financial services contributed more than half of Ant’s overall revenues in the six months ended June 30.Its largest business is now what it has dubbed CreditTech, providing credit to consumers and small businesses, surpassing payments and generating 39.4 per cent of its revenue in the six months ended June 30.Ant is the largest online provider of microfinance services in China in terms of total outstanding credit balance originated through its platform, according to consultancy Oliver Wyman.Management likens China’s banks to the arteries of the economy, financing growth. They see Ant as the capillaries that transmit funds to the extremities of the economy, small businesses and individuals.Ant originates loans, 98 per cent of which are then underwritten by financial institutions or securitised. As of June 30, it was working with about 100 banks, including all policy banks, large national state-owned banks, all national joint-stock banks, leading city and rural commercial banks, international banks that operate in China, as well as trust companies.Its platform takes just three minutes to process a loan and 1 second to disburse the loan, with zero human intervention.The consumer credit and small business credit balance in China could swell to 50 trillion yuan by 2025, and Ant has only tapped about 4 per cent of this huge market so far.In investment services, Ant has partnered with 170 asset managers, as well as banks and insurers, to provide wealth management products to its customers. As of June 30, the so-called InvestmentTech segment had 4.1 trillion yuan in assets under management sold through Ant’s platform.The insurance business also is a growing segment, accounting for 8.4 per cent of its revenue in the six months ended June 30.Ant is the largest online insurance services platform in China in terms of premiums generated, according to Oliver Wyman. It has relationships with about 90 insurers in the mainland, representing about 52 billion yuan in premiums generated and contributions through its online mutual-aid platform Xiang Hu Bao in the twelve months ended June 30.China’s online insurance premiums will hit 1.9 trillion yuan by 2025 at a CAGR of 38.1 per cent, said Oliver Wyman. Ant’s premiums are still under 1 per cent of this fast-growing pie.QR codes for WeChat Pay (left) and Alipay, whcih dominate the mobile payments market in China. Photo: Reuters alt=QR codes for WeChat Pay (left) and Alipay, whcih dominate the mobile payments market in China. Photo: ReutersHow does Ant compare with Tencent Holdings?Alipay and Tencent’s WeChat Pay command a virtual duopoly in China’s mobile payments, which accounted for US$15.9 trillion in transactions in the second quarter, according to the most recent data from the People’s Bank of China.There were 30.1 billion mobile transactions alone in the mainland in the second quarter, a 26.9 per cent increase over the year-earlier period.The two players had an aggregate market share of 90 per cent of third-party mobile payments in China at the end of last year, according to Mizuho Securities.It is difficult to directly compare Alipay to Tencent’s WeChat Pay as Hong Kong-listed Tencent does not break them out separately but WeChat Pay is included in its fintech and business services division.In 2019, Alipay generated a higher average transaction size – 483 yuan versus 183 yuan at Tencent’s payment affiliate Caifutong, according to Morningstar analysts. Ant also generated a gross margin nearly double that of Tencent’s fintech business last year.Other differences also remain between their payments businesses. Not least, WeChat Pay is integrated into WeChat while Alipay is a stand-alone app, linked to consumers’ bank accounts.A figurine of Ant’s mascot sits on a desk at the company’s headquarters in Hangzhou. Photo: Bloomberg alt=A figurine of Ant’s mascot sits on a desk at the company’s headquarters in Hangzhou. Photo: BloombergWhat are Ant’s emerging growth drivers?Future revenue drivers include Ant’s blockchain business, dubbed Antchain, as well as international expansion and merchant services.Ant started to explore blockchain’s potential around six years ago and has been investing in the technology ever since. It has taken the lead globally in terms of technical capability and developed around 50 commercial applications.In March, Simon Hu, Ant’s chief executive, released a three-year plan to open up Alipay as an online gateway for businesses ranging from retailers to hotels, working with 50,000 independent software vendors to digitally upgrade 40 million merchants.Ant’s management predicts that the 80 million small businesses it serves today will swell to 163 million by 2025.Analysts sent research to investors on Wednesday pegging Ant’s near-term valuation roughly between US$350 billion and US$450 billion on a like-for-like basis, including the money it is raising in the IPO, according to people familiar with the matter.On a different time frame, JPMorgan analysts are particularly bullish on future growth potential and estimated Ant’s market capitalisation would swell to north of US$500 billion post-money.Credit Suisse analysts peg Ant’s valuation between US$380 billion and US$461 billion, with a price/earnings to growth ratio between 1.2 times and 1.4 times. They forecast Ant’s net profit will hit 56 billion yuan (US$8.4 billion) in 2021 and 75 billion yuan in 2022.Ant Bank is a virtual banking arm of Ant in Hong Kong. Photo: Handout alt=Ant Bank is a virtual banking arm of Ant in Hong Kong. Photo: HandoutHow big is Ant outside mainland China?Mainland China accounted for 95.6 per cent of Ant’s revenue for the six months ended June 30, and most of its revenue from outside China was from cross-border payment services.But, Ant and other payment providers are seeking to expand internationally and diversify domestically as the third-party mobile payment industry has become saturated in China in terms of the number of users.”Future opportunities would lie in cross-border payment, inbound tourism and overseas markets,” said Ben Huang, an analyst at Mizuho Securities.Ant has been expanding overseas for the past decade and is now present across the Asia-Pacific region and in Chinese tourist hotspots globally.It had forged partnerships with local partners in Bangladesh, Hong Kong, India, Indonesia, Korea, Malaysia, Pakistan, the Philippines and Thailand as of March 31.Ant also won a virtual bank license in Hong Kong and is applying for one in Singapore.Alipay’s in-store payment service is in more than 50 markets globally. Alipay supports 27 currencies and works with over 250 overseas financial institutions and payment solution providers to enable cross-border payments for Chinese travelling overseas, and overseas customers who purchase products from Chinese e-commerce sites.Ant is seeking to expand into products beyond payments as part of its growth strategy. Photo: Reuters alt=Ant is seeking to expand into products beyond payments as part of its growth strategy. Photo: ReutersDo rising US-China tensions present a risk to Ant’s business?Ant’s business in the US is “negligible”, but the company warned the worsening relationship between the world’s biggest economies had raised concerns the US may impose “increased regulatory challenges or enhanced restrictions” on Chinese companies.Two years ago, Ant’s US$1.2 billion deal to acquire money transfer firm Moneygram International fell apart after a US government panel rejected the transaction over national security concerns.Bloomberg reported this month that the US was considering potential actions against Tencent and Ant over their payment apps. Reuters also reported the US State Department submitted a proposal to blacklist Ant by adding it to the so-called entity list, which restricts the sale of certain technology.Citing potential risks to its outlook, Ant said that restricted items compromise an “immaterial” portion of its technology and software, but any such restrictions could “materially and adversely” affect its ability to acquire technologies that may be critical to its business and impede its ability to access US-based cloud services or operate in the US.”In addition, these policies and measures directed at China and Chinese companies could have the effect of discouraging US persons and organizations to work for, provide services to or cooperate with Chinese companies, which could hinder our ability to hire or retain qualified personnel and find suitable partners for our business,” Ant said in its prospectus.What is the relationship between Alibaba and Ant today?Alibaba, which owns the Post, and Ant remain closely intertwined despite Alipay being spun off in 2011, a huge competitive advantage for the digital financial services group.Billionaire Jack Ma holds a controlling shareholder of Ant and the co-founder and former executive chairman of Alibaba. Ma controls 50.52 per cent of Ant’s shares.Within Alibaba’s so-called walled garden, about 70 per cent of the gross merchandise volume generated by its marketplaces in China was settled through Alipay in the twelve months to March 31.Alibaba also pays Alipay a fee, on favourable terms to Alibaba, for payment services to its consumers and merchants. In the financial year 2020, those service fees were 8.7 billion yuan.In February 2018, Alibaba, through its subsidiaries, took a 33 per cent equity stake in Ant, which it still holds. Alibaba has subscribed to Ant shares to prevent the IPO from diluting its stake.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.

Cover Story: A Fugitive Businessman’s High-Profile Bet in Myanmar

Little public information is available about She outside company documents, which often portray him as a leading entrepreneur and philanthropist.

A high-profile investment project in Myanmar backed by a reclusive Chinese businessman who has done business under at least four names fell under scrutiny for allegations of illegal gambling operations, bringing to light the investor’s shady business history.

At the center of the controversy is an ambitious $15 billion project called Yatai City that aims to turn a quiet Myanmar border village into a Singapore-like business hub, according to public information. The main architect of what’s also known as the Myanmar Yatai Shwe Kokko Special Economic Zone is a 38-year-old expatriate Chinese businessman who goes by the name She Kailun and three others, based on Caixin reporting.

She, the chairman of Yatai International Holding Group, is the honorary president of several Chinese chambers of commerce in Southeast Asian countries and a leading figure in the overseas Chinese community in the region. Little public information is available about She outside company documents, which often portray him as a leading entrepreneur and philanthropist.

But a Caixin examination of court and public documents showed that She had a stained business track record in China and is listed by a court as a fugitive from illegal gambling charges.

His Yatai City is a massive commercial project located in a small town on the Moei River in Kayin State, bordering Thailand. Developed by Hong Kong-registered Yatai International since 2017, the project is planned to cover 12,000 hectares. Yatai City is billed as an industrial and entertainment complex that will accommodate a vast range of services including tourism, commerce, logistics, finance and technology development.

1

Located in a border town in Myanmar, the Yatai City project is falsely described as an industrial and entertainment complex under China’s Belt and Road initiative.

In marketing documents, Yatai City is described as part of the China, Thailand and Myanmar Economic Corridor regional development plan and a model project under Chinese President Xi Jinping’s signature Belt and Road Initiative.

But in reality, Yatai City has nothing to do with the government-backed Belt and Road Initiative and doesn’t involve any direct investment from China, according to China’s embassy in Myanmar. The Chinese government has never allowed domestic investors to participate in overseas gambling projects, the embassy said.

Moreover, the Myanmar government is investigating it for illegal cross-border gambling after local media questioned the legality of Yatai City’s business operations. Several international non-governmental organizations (NGOs) have cited Yatai City as a major backer of illegal cross-border gambling in Myanmar.

According to a report by Myanmar-based Karen Peace Support Network, a number of online and offline gambling facilities have been operated in Yatai City, sparking local residents’ concerns over money laundering and other crimes.

Public documents show that She is from the landlocked province of Hunan in south central China and later developed businesses in several Southeast Asian countries. He was little known by overseas Chinese communities in Southeast Asia until he appeared in Myanmar with the Yatai City project in 2017. She then became an active figure in Chinese business circles in Myanmar and Cambodia and was named the leader of several organizations of overseas Chinese businesspeople.

Several people with knowledge of Yatai City told Caixin that while the project is marketed as a smart industrial park, it is actually a hub of casinos that moved from the Philippines and Cambodia amid local crackdowns. There are several online gambling sites operating in Yatai City that target users from China, they said.

She declined Caixin’s request for comment. A person close to him said She wants to stay low-key amid recent disputes.

A new city for casinos

A Chinese developer who invested tens of millions of yuan to build offices and residential buildings in Yatai City since 2019 said there are “all kinds of” gambling services inside the industrial park.

A local worker at Yatai City also said there are many online gambling companies located in the city offering gambling-related online games.

Caixin found that between October and December 2017, Yatai City published a large number of recruitment ads on its Facebook page, looking for Chinese-speaking customer service staffers and offering generous pay. A person close to the matter said the hiring was mainly for gambling services.

A list of companies published by Yatai City earlier this year showed several companies sharing the same name with Cambodia-based gambling companies.

In August 2019, the Cambodia government issued a policy banning online gambling, propelling a large number of gambling operators in the coastal city of Sihanoukville, many involving Chinese investments, to seek new shelters. Almost at the same time, Yatai City launched an intensive marketing campaign to lure businesses to settle in the park.

The Chinese developer said the location of Yatai City allows visitors to easily travel between Myanmar and Thailand and Cambodia. Meanwhile, the region doesn’t share a border with China, leaving the business out of the scrutiny of the Chinese government.

According to records in Myanmar, Yatai International registered its Myanmar operation in 2017 with $1.24 million. She Zhi Jiang, a Cambodian Chinese, was identified as the largest shareholder. Two other shareholders include a Malaysian citizen and a Myanmar military officer.

Caixin learned from separate sources that She Zhi Jiang is a former name of She Kailun.

In addition to online gambling services, Yatai City also hosts at least three casinos serving local and overseas customers, local media reported. A local NGO source said there are also certain areas in Yatai City that are strictly guarded to allow entrance of only special guests.

Such practice violates Myanmar law. Although the Myanmar government allows overseas investors to operate casinos, the practice is banned in certain regions including where Yatai City is located.

Yatai City also claimed to adopt blockchain technology provided by a Singapore-based company to allow users to communicate, exchange currency and make transactions. The service, known as Fincy, also offers online wealth management and gaming services.

A blockchain expert said such services offer a shadowy channel to funnel funds to gambling platforms while skirting foreign exchange oversight.

Business registration records in Singapore showed that BCB, the company operating Fincy, is registered with the same address as a company controlled by She.

The man with four names

Myanmar business registration records showed that Myanmar Yatai International is majority controlled by She Zhi Jiang, a China-born Cambodian citizen. But according to marketing documents of Yatai City, the boss of the project is She Kailun, identified as a Chinese Cambodian. Caixin found that the two names belong to the same person, who is also known as Tang Kailun or Tang Kriang Kai.

According to a 2018 report published by a journal backed by the China Federation of Overseas Chinese Entrepreneurs (CFOCE), one of the leading business organizations of overseas Chinese, She was born in the countryside of Hunan and moved to southern China’s Guangxi in 1996. After trying dozens of jobs, She made a fortune from developing online games and then went to Manila for new business opportunities.

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She Kailun

There is little information about She’s business in the Philippines. But documents from a Chinese court shed light on shady dealings. In 2014, a court in Shandong convicted a man named She Zhi Jiang for operating an illegal lottery business in the Philippines targeting Chinese online users, making illegal gains of 2.2 billion yuan. She remained a fugitive while eight of his accomplices were sentenced to jail for 15 to 24 months, according to the court documents.

The birthday and photo on the documents show that She Zhi Jiang is She Kailun.

Public information showed that She in 2014 registered a company called Chong Hua General Enterprises in the Philippines. The next year, a local newspaper reported that 154 foreign nationals employed by Chong Hua were deported by Philippine authorities for involvement in illegal online gambling. Chong Hua was fined 4.4 million pesos ($91,000) for the violations.

In January 2017, She obtained Cambodian citizenship and changed his name to Tang Kriang Kai, according to Cambodian government records. The same month, She registered Yatai International in Hong Kong with HK$100 ($13).

Since 2017, She became more active in public using the name She Kailun and earned nearly a dozen social titles.

In September 2017, She made a high-profile appearance at the annual World Chinese Entrepreneurs Convention in Yangon, Myanmar, during which he signed the agreement with local authorities to develop Yatai City. In December that year, She was named vice chairman of the CFOCE. She has repeatedly linked Yatai City with China’s Belt and Road initiative.

Yu Xinqi, a leader of the Chinese community in Thailand who has known She for three years, said She managed to set up connections with many overseas entrepreneurs in Hong Kong, including CFOCE chairman Zhong Baojia, and used such connections to expand his business reach.

Public information showed that Yatai International had business dealings with Chinese state-owned companies including China Railway 20 Bureau Group and China National Real Estate Development Group. At the same time, She won more honorary titles in overseas Chinese communities through sponsorships and by making generous donations.

But some people questioned She’s rise and the funding source of Yatai City. Several Chinese business leaders in the Philippines accused She of doing shady deals that damage the image of overseas Chinese entrepreneurs.

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Yatai International’s office in Beijing was vacant in September. Photo: Caixin/Cai Yingli

Since 2019, local media outlets and NGOs in Myanmar published a series of reports questioning Yatai City’s business operations. In July, the CFOCE removed She as vice chairman and revoked his membership amid the investigation of Yatai City.

In August, the Chinese embassy in Myanmar issued a statement saying that the project “is a third-country investment and has nothing to do with the Belt and Road Initiative.”

A Caixin visit to Yatai International’s office in downtown Beijing in late September found an empty room. The manager of the building said the office was vacant for nearly three weeks, but the lease was still valid.

Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bobsimison@caixin.com).

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