China stopped what would have been the biggest IPO ever because the company was too good at making money.
In November 2020, days before Ant Financial was due to list in what would have been the largest IPO in history, Chinese regulators called it off. The usual Western reading is political: Jack Ma had just criticized the regulators in public, and an authoritarian state reminded a billionaire who was in charge. That reading leaves a puzzle. Why would a government that wants growth kill its most valuable fintech company at the moment investors were lining up to fund it?
What Ant was actually doing
To its users Ant looked like a payments app. Its main income came from lending: high-interest credit to people who could not get bank loans, at rates that would make a payday lender blush. It made those loans, securitized them into income streams for investors, and used the proceeds to lend again. That cycle creates money. Most of the money in any economy is private-sector credit rather than government-issued currency, and whoever creates credit decides who gets to spend. Shadow banks use monetized IOU streams to compete with government fiat. A listed Ant, with public capital behind it, could have created enormous amounts of money outside the state’s control, which threatened China’s monetary sovereignty and not just a regulator’s pride.
China’s response follows from treating private-sector money as a public utility. In the Chinese model, tightening conditions force capitalists to make things instead of expanding by deploying capital. Companies have to turn a profit and pay their way from that profit, rather than rely on a constant stream of new funding. When finance is a utility, capital serves production. When finance is an industry, production serves capital.
The American version
In the United States, finance is an industry, and the machine China shut down runs freely. A company can survive for years on investors rather than on profitable customers. Uber and Lyft subsidized rides below cost with investor money, including billions from Saudi Arabia’s sovereign wealth fund, to break the taxi industry and win a monopoly. The bet is the cash flow game turned predatory: burn capital to engrave habits into a society, then harvest those habits once the competition is gone. Meanwhile the profitable businesses that served real needs are the ones that disappear.
So a financial company that relies on investors instead of profitable customers is not a business — it is a capital deployment vehicle. Its purpose is to convert investor money into market share that can be monetized later. It is the same logic, capital growing on its own terms rather than production’s, that China refused to let Ant scale.
Both systems pay
None of this makes the Chinese approach cheap. Its costs are severe: financial repression, trapped savers, and capital fleeing to gold, bitcoin and real estate, because capital that cannot earn financial returns seeks any available exit. The American costs are severe too, in rent-seeking, wrecked productive businesses and concentrated wealth, but they are harder to see because they show up as rising asset prices rather than falling wages.
The real difference is not freedom against control. It is that the distinction between finance-as-utility and finance-as-industry determines whether capital formation serves production or production serves capital formation. Whoever controls money creation is the real sovereign, whether that is an elected government or a financial system that decides who gets credit and at what price. Every economy answers, usually without saying so, who the master is: the people who make things, or the people who move money. It is worth asking the same of the apps on your phone, and which of them are waiting for the subsidy to end.
References:
- Cory Doctorow, Jack Ma and the Long Grift