Ant Group fintech rival JD Digits restructures amid Beijing’s Big Tech crackdown

Minghe Hu
·5-min read

JD Digits, the finance arm of JD.com that was known as JD Finance until September 2018, has been restructured as JD Technology as the Chinese e-commerce giant adjusted its business structure and rebranded itself in response to Beijing’s increasing scrutiny of large tech companies’ involvement in finance.

JD.com, a competitor of Alibaba Group Holding in areas such as e-commerce and delivery, said on Monday that it created JD Technology by combining its fintech affiliate JD Digits with its artificial intelligence and cloud businesses. JD previously held a 36.8 per cent stake in JD Digits, according to the fintech firm’s prospectus, but its stake in JD Technology is not yet known. Alibaba is the owner of the South China Morning Post.

Li Yayun, who was the chief compliance officer of JD.com, was named CEO of JD Technology. Li will be responsible for the daily operations of the new venture and reports directly to JD Group founder Richard Liu Qiangdong, according to the company.

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The restructure came amid a sweeping regulatory change in China following Beijing’s last-minute suspension of a planned initial public offering by Ant Group, a fintech company spun off from Alibaba. Before restructuring, JD Digits had also applied for an IPO on China’s domestic stock market.

China’s financial regulators published new rules in early November regarding online microcredit, requiring tech firms involved in such business to apply for licenses and hold sufficient reserve funds. The new requirements, which are expected to be implemented soon, will significantly alter the business environment for fintech operations.

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Analysts said that the personnel reshuffle and business repositioning at JD Digits offers a glimpse at how Chinese technology giants are scrambling to adapt to a new regulatory environment. According to the latest financial figures released by JD Digits, its consumer credit products, including Baitiao and Jintiao, accounted for over 40 per cent of total revenues.

“The risk management and regulatory compliance is to deal with the regulators. JD.com may feel a lot of regulatory pressure,” said Jason Zhao, managing partner at CGF Capital, an institute focused on fintech investment. “Compliance is more important than doing business now, because if you are not handling it well, you will not have business to do.”

JD declined to comment for this story.

Li, the new JD Technology CEO who was born in 1980, had mainly been responsible for compliance at JD since joining the company in 2007, with little experience in running a business. She was also the company’s Communist Party secretary, state-run media Xinhua reported in March 2020.

“JD Technology is an enterprise that deeply integrates technological innovation and the real economy,” Li said in a corporate statement released on Monday, using a term that refers to the economy of physical goods. “The mission of JD Technology in the future is to help the digital transformation and upgrading of the real economy.”

Chang Liang, executive director at EqualOcean, said that by appointing a person like Li, JD made it clear where its priorities lie.

“Whether it is technological compliance or societally imposed compliance, it’s a key and sensitive issue,” Chang said. “The establishment of JD Technology and the appointment of Li gives a strong signal that JD Digits wants to weaken the finance side and enhance its technology side.”

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Industry insiders said JD Digits, a similar business to Ant Group, is in desperate need to manage compliance risks to keep its IPO process on track following Ant’s aborted IPO plan. Since an October speech by Jack Ma, the Alibaba and Ant founder who reportedly drew the ire of Beijing authorities by comparing traditional banks to pawnshops, the entire fintech industry has been put under the microscope, said CGF Capital’s Zhao.

“So they changed the name to ‘technology’ out of the fear that authorities would strike them. After all, their main business is still fintech, ” he said.

“JD Digits has more reasons to do self-censorship on regulatory compliance [after the Ant crackdown],” said Dingding Zhang, an internet industry commentator and former head of Beijing-based research firm Sootoo Institute. “The finance industry deserves stricter rules and regulations as it is key to economic development.”

JD Digits filed in September to join Shanghai’s Nasdaq-style Star Market, hoping to raise 20 billion yuan (US$3.1 billion). The company started out in 2013 as a payment processor for JD’s e-commerce platform, providing merchants and consumers with financial services.

In addition to the reshuffling at JD Digits, Beijing-based JD.com has gone through other unusual personnel changes recently. At the end of December, the company appointed Yu Rui, the company’s chief human resources officer, to take the reins as chief executive of JD Logistics. The company said the previous executive, Wang Zhenhui, resigned for “personal reasons”.

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