The US Department of State has submitted a proposal for US President Donald Trump’s administration to add China’s Ant Group (螞蟻集團) to a trade blacklist before the financial technology firm is slated to go public, two people familiar with the matter said.
It was not immediately clear when the US government agencies that decide whether to add a company to the so-called “entity list” would review the matter.
The move comes as China hardliners in the Trump administration are seeking to send a message to deter US investors from taking part in the initial public offering for Ant.
The dual listing in Shanghai and Hong Kong could be worth up to a record US$35 billion.
The latest swipe at China also comes in the run-up to the Nov. 3 US presidential election, in which Trump, trailing in the polls against his Democratic rival, former US vice president Joe Biden, has made a tough approach to China an important foreign policy platform.
While the Alipay (支付寶) payment app is currently unavailable for users in the US, according to a spokesperson for Ant, Trump administration officials fear that the Chinese government could access sensitive banking data belonging to potential US users.
The Committee on Foreign Investment in the US in 2018 stopped its US$1.2 billion bid to buy the money transfer company Moneygram International Inc over national security risks.
The State Department did not respond to a request for comment.
Ant, an affiliate of Alibaba Group Holding Ltd (阿里巴巴), declined to comment, but in a recent statement said that only 5 percent of the company’s business is outside China.
The entity list, which makes it more difficult for US firms to sell high-tech items to blacklisted companies, has become the tool of choice for the Trump administration to punish Chinese companies, though its real-world impact is sometimes questionable.
Ant is China’s dominant mobile payments company, offering loans, payments, insurance and asset management services via mobile apps. It is 33 percent owned by Alibaba and controlled by Alibaba founder Jack Ma (馬雲).
Ant’s Alipay, like Tencent Holding Ltd’s (騰訊) WeChat (微信) platform, is used primarily by Chinese with yuan accounts. Most of its US interactions are with merchants accepting payment from Chinese travelers and businesses in the country.
US Senator Marco Rubio, who has successfully urged the Trump administration to pursue investigations of Chinese companies, last week called for the US government to consider options to delay Ant’s initial public offering (IPO).
The impact of such blacklisting on firms seeking an IPO is evidenced by the failure of Chinese artificial intelligence firm Megvii Technology Ltd (曠視科技) to clear a hearing with the Hong Kong exchange in November last year, en route to a planned listing of US$500 million.
The exchange sought more information from Megvii, including details of its suitability for a Hong Kong IPO, after the US in October last year put it on a trade blacklist.
The US End User Review Committee, which decides which companies to add to the list, includes the departments of state, defense, energy and commerce. The defense and commerce departments declined to comment while the energy department did not respond to a request for comment.
The Hong Kong leg of the IPO is being sponsored by China International Capital Corp (中國國際金融), Citigroup Inc, JPMorgan Chase & Co and Morgan Stanley. Credit Suisse Group AG is working as a joint global coordinator. Goldman Sachs Group Inc is also involved.
However, approval for the IPO has been delayed. On Tuesday, Reuters reported that the China Securities Regulatory Commission is probing a potential conflict of interest in Ant’s planned stock listing.
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