Jack Ma’s Ant Group and Tencent Holding Ltd have become the latest targets of Trump’s administration. The duo’s payment platforms have become popular among Americans, and now, Washington thinks it could pose a threat to the United States national security.
Bloomberg broke the news on Wednesday citing sources. The report said senior US officials are seriously debating the idea, though decision is not expected soon. The idea was discussed in a meeting held at the White House on September 30.
The sources said US officials are concerned that payments platforms of Chinese origin will likely dominate global digital payment space, and thus, give China access to banking and personal data of hundreds of millions of users.
The development however, opens a new chapter in the US vs China political playbook, and exposes both Tencent and Alipay to a future of business uncertainties.
But the move is at its early stage and will likely meet a lot of challenges. According to the report, officials acknowledged that they are yet to sort out the mechanism, and that is proving difficult to do as they are yet to find a legally sound approach. And there is no indication that the idea has been presented to Trump due to his illness. Trump tested positive for COVId-19 a day after officials met to discuss China, and the issue hasn’t made progress at senior level since then, a source said.
This is developing at a time when the Ant Group and Alibaba Group Ltd are gearing up for their blockbuster IPO on Hong Kong and Shanghai’s markets that is billed to happen simultaneously next month. The market debut is expected to surpass Saudi Aramco’s $29.4 billion last December, which still holds the largest IPO record till date.
Reuters reported that the Ant Group is seeking to raise about $35 billion in the dual IPO after assessing early investor interest and based on a higher valuation of about $250 billion or more.
The move by the US officials may stain the chance of Ant Group to reach its IPO prospectus, as it would cast doubts on the minds of investors who are already lining up to invest billions into the companies.
Although the Ant Group said in a statement that it is unaware of any administration discussions, moreover, “business is primarily in China and we are excited about our own growth prospects in the China market,” the development will affect its chances of growth in the global market.
It is not clear on what basis of authority the US officials will push the matter. However, analysis by Bloomberg showed a few options of authority that restriction measures could be implemented on.
One of the options would be to use the authorities granted under a 2019 order to protect the digital supply chain. But with the election due November 3, and its outcome uncertain, the option would likely add weeks to the administration’s timeline. Another option, which is considered speedier, would be to tread along the line of presidential executive orders that placed bans on TikTok and WeChat.
But executive orders have their disadvantages; it gives room for lawsuits, and courts may rule against the government. Just like in the case of TikTok and WeChat where the court granted injunctions halting Trump’s administration aim to ban the apps and granting temporary reprieve to the apps from being removed from online stores.
In the ruling, the court said White House may have exceeded its authority. But it may be a different story in the case of Ant Group and Tencent. One official said the administration thinks it would have an easier time in the courts if it went that route because TikTok and WeChat bans were challenged on the grounds of free-speech, a situation which is not applicable with Alipay and Tencent.
Another option on the administration’s menu is putting Ant Group and Tencent on the Treasury Department’s specially designated national list, making them radioactive for US companies, and probably, firms outside the United States, to do business with.
While everything is still under debate, any of the options would hurt the already strained relationship between Washington and Beijing.
Trump has been aiming at China on many fronts, particularly technology. A means he believes the Chinese Communist Party is using to spy on other nations and promote propaganda.
With Huawei reeling through US sanctions and TikTok and WeChat fighting to stay alive, Chinese tech companies, including the Ant Group and Tencent are learning to keep their growth mainly with China.
Trump said on Wednesday that China will pay for coronavirus, and it is not yet clear how he wants the South Asian giant to pay. However, the discussion suggests the administration is all out for a vendetta with the Chinese tech industry, if it is not as revenge for the ravages of the virus on the US, it will be as a result of China’s growing dominance in the global digital space.