Ant Group has been granted regulatory approval to establish a new consumer finance company.
The approval is a positive step forward for the company after it was forced to restructure its business as regulators crack down on big technology conglomerates.
The China Banking and Insurance Regulatory Commission said Friday that Ant Group will hold a 50% stake in the new company and invest around 4 billion yuan ($625.93 million) as registered capital. Six other shareholders will hold the other 50% stake, while also contributing another 4 billion Yuan.
The new company - called Chongqing Ant Consumer Finance Co. - will be registered in the city of Chongqing with a total registered capital of 8 billion yuan ($1.25 billion).
Ant Group's credit businesses in Jiebei and Huabei will be moved to the new consumer finance company, which will be offering other financial services such as personal loans and bonds.
The formation of Chongqing Ant Consumer Finance comes just months after Ant Group was blocked by Chinese authorities from launching its planned record-breaking $34.5 billion initial public offering in Shanghai. Authorities that blocked the plan cited regulatory concerns.
Following the cancellation of the transaction, Ant Group was ordered by the People's Bank of China to submit a rectification plan. It was also proposed that Ant Group be transitioned into a financial holding company, which would allow it to be regulated more like a bank.
Analysts said the formation of a new consumer finance entity is the right move for Ant Group to resolve growing regulatory issues.
"It is a positive sign for Ant as it means regulators are still supportive of Ant being in the lending business - except that it is now able to regulate them. The other positive is that it indicates progress for Ant in restructuring their business to regulators' requirements," analysts at Bernstein said.
Ant Group said Friday that it will be working alongside regulators and its shareholders to serve the needs of consumers. The company said it will continue to work to enhance the quality of its services and risk management capabilities.
