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Washington is trying to get the Ant Group, 33% owned by Alibaba and controlled by billionaire Jack Ma, on the US Entity List, a blacklist that prevents American companies from doing business with publicly traded individuals or companies. This comes from a Reuters report quoting people who are familiar with the matter.
The Entity List requires American companies to obtain a license before exporting certain products to blacklisted companies.
Ant Group is currently preparing for a blockbuster IPO in Shanghai and Hong Kong, so there is a risk of being blacklisted at a very sensitive time.
Center for the innovation of the future
“The trade blacklist is largely symbolic. It won’t stop Ant from going public or investing in critical areas (e.g. blockchain), ”said Abishur Prakash, geopolitical specialist at the Center for Innovating the Future (CIF), a Toronto-based consultancy shared CNBC via email with.
“But the blacklist is effective in another way: other countries are cautious when it comes to connecting their technical ecosystems to China.”
How Ant Group is different
In terms of operations, Ant Group on the entity list, I don’t think this will affect their business.
A significant part of Ant Group’s business is selling financial technology to financial institutions and generating technology service fees. Here, too, a large part of it is concentrated on China.
Less than 5% of Ant Group’s sales come from overseas.
“Operationally, Ant Group on the Entity List, I don’t think this will affect their business,” Edith Yeung, general partner of venture capital firm Race Capital, told CNBC.
However, the Ant Group has some partnerships with American companies. In 2017, the US payment platform Stripe announced a partnership with Alipay that would allow merchants using the Stripe system to accept payments through the mobile wallet.
Last year, Alipay and investment giant Vanguard partnered to set up a joint venture to provide investment advice to Chinese users.
Republican Senator Marco Rubio last week called on the US government to consider ways to delay Ant Group’s IPO.
“It is outrageous that Wall Street is rewarding the Chinese Communist Party’s overt crackdown on Hong Kong’s freedom and autonomy by coordinating the Ant Group’s IPO on the Hong Kong and Shanghai stock exchanges,” Republican Rubio said in a statement to Reuters.
“Management should seriously consider what options are available to delay the Ant Group IPO,” he added.
It is currently unclear what Washington could do to delay the listings.
Ant Group is aware of geopolitical tensions and has cited them as a risk to its business in the IPO prospectus filed on the Hong Kong Stock Exchange. The company pointed out the export restrictions and other sanctions imposed by the US on Huawei.
“These restrictions, and similar or broader restrictions that may be imposed by the United States or other jurisdictions in the future, may affect our ability to acquire or use technology, systems, devices, or components that may be critical to our technology infrastructure, materially and adversely affect service offerings and business operations to access cloud-based systems and other infrastructures in the US and operate in the US, “said Ant Group.
The company said it could also impact its ability to hire American talent, and there is the possibility of sanctions that undermine the company’s reputation.
“We cannot assure you that current export controls, economic, trade or other sanctions will not adversely affect our business or reputation, or that the associated trend will not deteriorate further in the future,” said Ant Group.
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