China’s state broadcaster has implicated Jack Ma’s Ant Group in a corruption scandal, ratcheting up pressure on the billionaire following a crackdown that has wiped billions of dollars from his internet empire.
A documentary on state-run China Central Television alleged that private companies made “unreasonably high payments” to the brother of the former Chinese Communist party head of Hangzhou, an eastern city that is home to Ant Group’s headquarters, in return for government policy incentives and support with buying real estate.
According to public records and two sources close to the deals, a unit of Ant Group bought two plots of land at a discount in Hangzhou in 2019 after taking stakes in two mobile payment businesses owned by the party secretary’s younger brother that were named in the documentary.
While the documentary did not name Jack Ma’s company, the Ant unit was the only external corporate investor in one of these businesses, according to the 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. Material aired by China’s state broadcaster represents the official party line.
The programme has intensified pressure on Ant, as the fintech group with more than 1bn users struggles to overhaul its business to comply with authorities’ demands. Chinese regulators pulled the plug on a $37bn initial public offering planned by the company in 2020 and forced it to restructure.
Last week, Ant suffered a setback to its government-led reform efforts 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 who was arrested in August for corruption, helped unidentified companies acquire cheap land and enjoy preferential policies after they bought shares in firms controlled by the senior official’s younger brother, Zhou Jianyong.
The younger Zhou, a former business school professor, launched 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 these cities.
“He won the business because I was a government official,” said Zhou, the former party secretary, about his brother in the documentary.
Ant entered into a series of deals with the younger Zhou. Public records show Shanghai Yunxin Venture Capital Management Co, a subsidiary of Ant, paid Rmb1.7m ($268,000) for a 14.3 per cent stake and a board seat in Youcheng United (Ningbo) in March 2019.
Later in the year, Shanghai Yunxin spent Rmb1.4m ($221,000) buying a 13.5 per cent stake in a Hangzhou-based subway payment provider owned by the junior Zhou and featured in the documentary, public records show. The Hangzhou company also includes a state-owned enterprise as an investor.
Less than a year after Ant completed the second investment, the fintech group won an auction for a plot in Hangzhou for Rmb5,194 ($819) per square metre as the only qualified bidder, land auction records show. Average home prices in the neighbourhood exceed Rmb45,000 ($7,100) per square metre, according to real estate websites.
In the documentary, the former party secretary’s brother claimed he charged a high price for investments in his companies.
“You of course know I am Zhou Jiangyong’s brother,” said Zhou Jianyong 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 was unable to reach the Zhou brothers for comment.
“The rise and fall of Ant epitomises 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 while Ant and his ecommerce group Alibaba battle the mounting political pressure, as China’s president Xi Jinping embarks on a “common prosperity” campaign to overhaul the country’s business and political landscape.
“The rise of Ant has a lot to do with its ability to curry favour from local officials,” said a person close to the fintech group. “It may now pay a price for that.”
After the documentary aired, the Communist party’s graft fighting commission said it would step up oversight of the country’s biggest internet companies “to cut off the link between power and capital”.