The Taiwan Banker

In April, Forbes magazine published an article entitled, What do Countries with the Best Coronavirus Responses have in Common? The answer was female leaders: the article listed President Tsai of Taiwan, Merkel of Germany, Arden of New Zealand, along with Iceland, Finland and Denmark. According to the article, their curiosity, decisiveness, technological aptitude, and empathy successfully slowed down the initial spread of the virus. Recently, Bloomberg also proclaimed that under the leadership of Tsai, Taiwan has continued expanding its voice in the world. Its soft power, which arises from advocacy of an inclusive and tolerant political culture, has paid dividends in international exposure. Furthermore, Taiwan’s Legislative Yuan is 43% female, not only the highest in Asia, but also among the top in the world. Digital Minister Audrey Tang is a key figure in Taiwan’s pandemic prevention success, and Taiwan’s youngest and first transgender cabinet member, representing its preeminence in gender equality. To be sure, men and women have inherent differences, which can be seen from neurological differences in language, spatial memory, and motor skills. Only through respect, tolerance, and mutual understanding of shortcomings can competition turn into cooperation. Tsai has repeatedly emphasized that “learning, understanding, and sharing will give us the opportunity to move forward together.” Indeed, particularly in a high-pressure sector like finance, women face restrictions including traditional social expectations and the so-called glass ceiling – obstacles that may not be set in stone but clearly exist and restrict certain groups, such as women, from reaching the top positions. But we’ve also seen that despite being required to simultaneously play the roles of mother, daughters, and wives, women can also be tireless employees and leaders, good at communication and compromise, and resilient and considerate. Taiwan’s finance industry still lags in gender empowerment. Although over half of employees in Taiwanese banks are female, inequality still exists in the highest ranks. According to a statistical report at the end of 2019, females make up only 17.18%, or less than 1/5 of senior executives. Thanks to President Tsai’s effort in recent years, however, and following moves in foreign banks such as Citibank’s appointment of Jane Frasier as its new CEO, we’ll see more female leaders in finance. Female leaders have different characteristics from men, and should not be considered inferior. The outstanding Taiwanese women who have worked hard and stood out have given full play to communications skills and detail orientation, allowing everyone on their teams to shine, and maintained positive and productive energy. I hope that in the future, women will no longer be restricted by their gender and be able to perform to their fullest. Beijing is China's Biggest Fintech Disruptor The nixed Ant Group IPO signals the Chinese state's determination to assert control over digital finance and manage systemic financial risk China has always been circumspect about disruptive fintechs. Since 2017, it has launched draconian crackdowns on both cryptocurrency and peer-to-peer (P2P) lending firms in a professed bid to curb systemic financial risk and threats to social stability. Those concerns have merit. But Beijing also worries that private companies untethered to the state might come to dominate the fast-digitizing financial sector. That brings us to Ant Group and its abortive initial public offering. The dual IPO - planned for Hong Kong and Shanghai - was billed as a blockbuster that would raise US$34.5 billion, making it the largest ever. Then Chinese regulators abruptly pulled the plug at the eleventh hour. The Shanghai Stock Exchange said that Ant reported "significant changes in the financial technology regulatory environment" that could result in the fintech giant "not meeting the conditions for listing or meeting the information disclosure requirements.” Of course, the decision to clip Ant's wings did not come out of thin air. Ant co-founder Jack Ma, China's second-richest man, tempted fate when he spoke out defiantly against the country's regulators and incumbent banks at the Bund Summit in Shanghai. Ma derided traditional banks for having "a pawnshop mentality." In a blunt criticism aimed at regulators, he said, "Your risk-free departments are putting the entire economy at the risk of non-development.” The Ant Group chief executive even appropriated the words of Chinese leader Xi Jinping to take a swipe at regulators and bolster his own arguments. It is unclear why Ma spoke with such candor. He may have believed he was untouchable. What is clear now is that Ma not only was wrong, but that he also infuriated Xi. An irate Xi personally nixed the IPO, according to The Wall Street Journal. The implications for Ant are grim. Analysts expect its valuation will more than halve from US$313 billion to under US$150 billion. The IPO may be delayed for six months or more while Ant works to comply with new regulations that will require micro-lenders to hold more capital. Beijing is concerned that highly leveraged online finance firms could underwrite too many risky loans, raising the possibility of mass defaults. Draft rules shift the burden of loan funding from banks to online lenders. Currently, Ant has a consumer loan balance of US$271 billion while funding just 2% of the loans itself. Under the expected regulatory changes, internet platforms will have to fund at least 30% of their loans. Loans will be capped at RMB 300,000 ($44,843) or 1/3 of a borrower’s annual salary, whichever is lower. At the same time, many retail investors who had bet on Ant now want their money back. Ahead of the abortive IPO, more than 10 million of them invested some US$9.07 billion in five mutual funds managed by some of China's largest investment firms and sold on Ant's super app Alipay. The funds said that they could invest up to 10% of their assets in Ant. The China Securities Regulatory Commission (CSRC) appears to be siding with the fund investors and is urging the funds to prioritize investors' interests. Investors in the five funds can apply between Nov. 22 and Dec. 23 to redeem their investment at no cost, according to a statement from an Ant subsidiary and the fund houses. Beijing's move to protect investors is a no-brainer. The last thing the Chinese government wants is millions of angry retail investors venting on social media that they have been swindled, particularly at this time of economic malaise. China's economy grew just 0.7% in the first three quarters of the year, compared to 6.1% for the full year in 2019. The fact that Chinese regulators put the Ant IPO on ice despite the potential damage to the company, investor sentiment and China's global image signals a renewed effort to assert state control over disruptive financial technology. Ant may be too big to fail, but not to corral. Fintech with Chinese characteristics Ant's suspended IPO shows that the firm has been unable to rebrand itself as a technology company in the eyes of regulators. For several years now, as regulatory pressure has mounted on digital lenders, Ant has been engaged in a public relations campaign to distance itself from the "fintech" label. It adopted the clumsy moniker "techfin" to emphasize that it is primarily a technology firm that enables digital financial services. In June, Ant even changed its name from "Ant Financial" to "Ant Group." In retrospect, China's regulators probably viewed those moves as sleight of hand. After all, Ant's core business is finance. It just happens to be digital finance. Guo Wuping, the head of consumer protection at China's banking regulator, said that fintech's "foothold is finance, and its essence is financial services" in a November commentary in the 21st Century Business Herald. "Therefore, emerging fintech companies are similar to licensed financial institutions, and their customers are financial consumers." The commentary emphasized that "there is no essential difference" between banks' microloan products and the fintech equivalent: Alipay's Jiebei, Jingdong's Jintiao and WeBank's Weilidai. At the Bund Summit where Jack Ma spoke, Vice Finance Minister Zou Jiayi said, "Fintech must not be allowed to dodge regulation, conduct illegal arbitrage and bolster a winner-take-all style of monopoly." Other Chinese fintechs will surely take heed of Zou's warning. Instead of acting as a catalyst for a flurry of Chinese fintech IPOs, the now-suspended Ant deal will take the wind out of the industry's sails - at least for the short term. Investor interest will cool. Fintechs planning to list in Shanghai or Hong Kong will lay low as they await finalization of new regulations. JD Digits, the fintech arm of e-commerce giant JD.com, will almost certainly delay an IPO on the Shanghai Star board that had been expected by year-end. That is probably for the best. JD Digits lost RMB 670 million in the first half of the year. Besides Ant Group, the internet giant Tencent is the largest digital finance player in China. However, Tencent has not indicated any of its fintech businesses plan to go public. Tencent does seem keen to avoid regulatory ire. “In our various fintech businesses, we position ourselves as a collaborator and technology enabler of the industry and with other partners, rather than a disrupter in the market,” Tencent President Martin Lau Chi-ping said during the recent Hong Kong FinTech Week webinar. Maybe Tencent sees itself that way. But the company long ago muscled in on the turf of incumbent banks with its success in payments, money-market funds, consumer lending and wealth management. Tencent's wealth management platform Licai manages more than RMB 1 trillion (US$151 billion) in aggregated customer assets. Revenue from Tencent's fintech and business services unit grew 30% annually in the second quarter to reach RMB 29.9 billion. Meanwhile, Ant's jettisoned IPO has not deterred the biggest China bulls. Ray Dalio, billionaire founder of the hedge fund giant Bridgewater Associates, said in a recent virtual town hall that the sudden nixing of the IPO was reasonable. The fintech giant "could replace or threaten the banking system in China. And it hasn't yet been properly established in terms of regulatory review and the like." Dalio added: "And it's important to be clear that what we have in China is state capitalism. So the state is going to control those things."