Ant Financial to issue China’s first security backed by loans to online retailers

Move opens a new financing channel for smaller retailers selling through big e-commerce sites

PUBLISHED : Friday, 16 March, 2018, 11:04pm
UPDATED : Saturday, 17 March, 2018, 8:20am

Ant Financial Services Group, operator of online payments service Alipay, has received regulatory approval to launch China’s first traded security backed by loans to online retailers, opening up a new financing channel for the e-commerce industry.

A subsidiary of Ant Financial will launch 2 billion yuan (US$317.4 million) worth of the asset-backed securities (ABS) on the Shanghai Stock Exchange, the bourse said in a statement on Friday.

So-called supply chain finance – or lending to small and medium-sized companies that supply goods to large firms – is taking off in China in tandem with the surge in e-commerce activities. It is becoming common among the thousands of online retailers who sell via huge e-commerce platforms, such as Alibaba Group Holding's Tmall and Taobao Marketplace.

“Supply chain finance has good prospects in China because it offers necessary financing services to small businesses,” said Hao Zhiwei, chief executive of Haowenhaokan, an advisory firm serving web-based companies. “The approval for an ABS will bolster supply chain finance players’ confidence.”

Forward Business, a Shenzhen-based consultancy focusing on the information technology sector, estimated that China’s supply chain finance sector will be worth 15 trillion yuan by 2020.

Supply chain finance tipped to become US$2.27tr market for Chinese internet firms by 2020

The unit of Ant Financial is among the 250 supply chain finance operators that offer loans to online stores running businesses on Alibaba’s e-commerce platforms, the exchange said.

Most ABS products in mainland China are backed by mortgage loans and car loans.

The green light given to the ABS product issued by Ant Financial, an affiliate of Alibaba, may be part of Beijing’s efforts to lure big technology businesses to list on mainland Chinese stock markets. Ant Financial is believed to be seeking an initial public offering.

New York-listed Alibaba owns the South China Morning Post.