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China tech

Ant halts $3bn sale of loan-backed securities after crackdown

Chinese fintech group seen shrinking mobile-lending operations

The suspension of the sale of debt-backed securities is a blow to Ant Financial's consumer credit business.   © Reuters

SHANGHAI -- Ant Group has abandoned its 18 billion yuan ($2.8 billion) sale of securities backed by online loans, apparently in response to China's mounting crackdown against the fintech heavyweight's lucrative consumer credit business.

Plans for the float, which was to be conducted by two Ant subsidiaries, were approved by the Shanghai Stock Exchange last fall. The Shanghai exchange gave no reason for the suspension of the sale when it announced the news Tuesday.

Asset-backed securities form a key part of the business model for Ant's smartphone microfinancing business, whose loan assets have grown to 2 trillion yuan. Though most of the funds are provided by partner banks, the Alibaba Group Holding affiliate foots a portion of the credit independently. Ant recoups its contribution by repackaging the debt into asset-backed securities that later are sold off.

If Ant halts issuing asset-backed securities, the group would face difficulty in expanding the consumer lending business as it shoulders more of the credit risk from the loans.

Chinese authorities are increasingly vigilant against the financial risks posed by the growth of mobile lending. Not only did the government suspend Ant's stock market debut in November, a series of rules restricting the issuance of asset-backed securities have gone into force.

Ant has indicated it will cooperate fully with regulatory watchdogs. The company has tightened credit to microbusinesses since spring.

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