Jack Ma’s Ant Group is involved in a corruption scandal in the Chinese media

China’s state television has implicated Jack Ma’s Ant Group in a corruption scandal, increasing pressure on the billionaire following a crackdown that wiped out billions of dollars from his internet empire.

A documentary on China’s state-run Central Television alleges that private companies made “unjustifiably high payments” to the brother of the former leader of the Hangzhou Communist Party, the eastern city of Ant Group’s headquarters, in exchange for government political incentives and support with the purchase of real estate.

According to public records and two sources close to the deals, a division 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, who were mentioned in the documentary.

Although the documentary did not name Jack Ma, the Ant unit was the only outside corporate investor in one of these businesses, according to 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 Discipline Control Commission. The material broadcast by Chinese state television is the official party line.

The program has stepped up pressure on Ant as a fintech group with more than 1 billion users struggles to review its business to meet government requirements. Chinese regulators have halted an initial $ 37 billion public offering planned by the company in 2020 and forced it to restructure.

Last week, Ant failed in its government-led reform efforts after a state asset manager withdrew from an investment deal in fintech’s credit division without explanation.

The documentary claims that Zhou Jiangyong, Hangzhou’s former party secretary, who was arrested in August for corruption, helped unidentified companies acquire cheap land and benefit from preferential policies after buying shares in companies controlled by -the younger brother of the senior official, Zhou Jianyong.

Younger Zhou, a former business school professor, launched Youcheng United (Ningbo) Information Technology Development Co. in 2016, winning contracts to build mobile subway payment systems in the coastal centers of Ningbo and Wenzhou, according to the documentary. At that time, his brother was the party secretary of these cities.

“He won the business because I was a civil servant,” Zhou, a former party secretary, said of his brother in the documentary.

Ant made a series of deals with the younger Zhou. Public records show that Shanghai Yunxin Venture Capital Management Co., a subsidiary of Ant, paid 1.7 million yuan ($ 268,000) for a 14.3 percent stake and a place on the board of Youcheng United (Ningbo) in March 2019.

Later in the year, Shanghai Yunxin spent 1.4 million yuan ($ 221,000) to buy a 13.5 percent stake in a Hangzhou-based subway payment provider owned by Zhou Jr. and featured in a documentary public show. Hangzhou also includes a state-owned enterprise as an investor.

Less than a year after Ant completed the second investment, the fintech group won a tender for a plot of land in Hangzhou for 5,194 yuan ($ 819) per square meter as the only qualified bidder, according to land auction records. Average housing prices in the neighborhood exceed 45,000 yuan ($ 7,100) per square meter, according to real estate websites.

In the documentary, the brother of the former party secretary claims that he charges a high price for investments in his companies.

“Of course, you know I’m Zhou Jianyong’s brother,” Zhou Jianyong said in the documentary. “You can imagine the price I raised. You want to take advantage of me. Shouldn’t I do the same with you? ”

Ant Group did not respond to a request for comment. The Financial Times was unable to contact the Zhou brothers for comment.

“The rise and fall of Ant embodies the unequal link between business and politics in China,” said Ne Huihua, a professor at Renmin University in Beijing.

Ma did not hold back as Ant and his e-commerce group Alibaba battled growing political pressure, while Chinese President Xi Jinping embarked on a campaign for “common prosperity” to review the country’s business and political landscape.

“Ant’s rise has a lot to do with his ability to win the favor of local officials,” said a man close to the fintech group. “Now you can pay the price for that.”

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