Ant Group’s US Setback Sends a Clear Signal

The media reported yesterday that the U.S. Department of State had submitted a proposal asking the administration to add Alibaba’s Ant Group to a trade blacklist. According to reports, “China hardliners in the Trump administration are seeking to send a message to deter U.S. investors from taking part in the initial public offering for Ant.”* In a sense, the U.S. is sending this signal only to Ant Group or Alibaba, but to all Chinese companies that have cross-border operations, especially in or through the United States.

It was previously reported that Ant Group was planning a dual listing in Shanghai and Hong Kong, which, according to estimates could bring the company’s initial public offering to $35 billion and is expected to become the world’s largest listing. The report said that the State Department proposed putting Ant on the trade blacklist because Trump administration officials fear the Chinese government could access sensitive banking data belonging to future U.S. users. This is not the first time that the U.S has used concerns about the spread of sensitive data as a justification to prevent a Chinese company from doing cross-border business, nor is it the first time Ant Group has been restricted from doing business on such grounds. In 2017, Ant Financial failed to acquire U.S. firm MoneyGram. This was also blocked on the grounds that any future leaks of personal information of U.S. consumers might threaten U.S. national security as well as the fact there was a lack of transparency about the acquirer’s funding sources.

The issue of data security has become the extraterritorial long-arm way for the United States to block Chinese companies from conducting cross-border international business. Especially where financial or data businesses are concerned, the United States, which dominates the operation of the international financial system and is a world leader in data technology and its applications, seems to make decisions based on U.S. domestic law. This will greatly affect the business expansion of the companies which are restricted and, as a result, its market prospects. Of course, as the report says, even if the Trump administration adopts the State Department’s proposal to put Ant Group on the trade blacklist, the impact on Ant Group is likely to be more symbolic.

But, in fact, the problem is not limited to the impact of blacklisting on Ant Group’s IPO. For the Ant Group, being included on the trade blacklist is a millstone around its neck. Even if the weight doesn’t concern Ant Group, it may deter potential investors. One can only assume that the weight exists, and Ant Group’s overseas IPOs and dollar-related businesses will have to constantly pay attention to them. The psychological impact this causes investors will directly or indirectly affect Ant Group’s business development.

In this situation, just as TikTok’s business has been blocked abroad, the United States’ long-arm practices are unlikely to be deterred by the efforts of just one company. In particular, for Chinese companies with cross-border business, its mainland business may be bigger; this is dictated by the size of China’s domestic market, but to be stronger, it will have to compete in international markets. This sort of competition is not only the basis for contemporary international trade and economics, but is the only way to open up China. It is quite a challenge knowing what to do in this situation.

*Editor’s note: Ant Group, formerly known as Ant Financial and Alipay, is an affiliate company of the Chinese Alibaba Group.