ACGBY Agricultural Bank of China (PK)

A $1.9 billion infusion gives Du Xiaoman the firepower to challenge China's fintech leaders

By Liza Lin 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 30, 2018).

Baidu Inc.'s former financial-services unit has attracted a $1.9 billion investment from firms including U.S. private-equity giants TPG and the Carlyle Group, giving it fresh ammunition to compete in China's increasingly crowded financial-services space.

The new firm, Du Xiaoman Financial, spun off from Chinese search giant Baidu as part of a corporate strategy to shed peripheral businesses and focus on a push into artificial intelligence. It has also attracted other investors including Agricultural Bank of China Ltd. and Taikang Group. Baidu announced the new investment on Saturday.

The financing will be used to develop new financial-technology platforms and to expand the unit's presence in China's financial ecosystem, Baidu said.

Launched in 2015, the Beijing-based financial-services group runs a mobile-wallet service as well as providing consumer loans and wealth management for its users. By the end of 2017, Baidu had built up its financing business to a loan balance of 28 billion yuan ($4.42 billion), TPG said.

This latest investment will give the company, previously known as Baidu Financial Services Group, more firepower to compete in China's increasingly competitive fintech space. Alibaba Group Holding affiliate Ant Financial Services Group, and rival WeChat Pay, run by Chinese social media giant Tencent Holdings, are currently the dominant players in China's mobile-payments space. But Du Xiaoman Financial sees room for growth in the broader market.

Investible assets in China's private wealth market were predicted to grow 14% year over year to reach 188 trillion yuan by the end of 2017, according to a study by Bain & Co and China Merchants Bank released last August. Official figures were unavailable to confirm that.

TPG, which manages more than $82 billion in assets world-wide, said the firm was eager to tap into China's growing financial services market. "As savings and lending activities move online, technology companies are able to use their big-data analytics to offer flexible micro-financing to the younger generation of consumers," said Chang Sun, TPG's China managing partner.

Du Xiaoman Financial's fundraising comes as many of its peers seek to tap into capital markets. Ant, which owns popular mobile-payments network Alipay and is one of China's largest nonbank lenders, is currently in talks with potential investors to raise at least $9 billion, The Wall Street Journal reported earlier this month.

Baidu first revealed the unit's spinoff last July in a conference call with investors, with chief operating officer Lu Qi adding that a new shareholding structure would allow the financial-service group to obtain new market licenses and expand further.

Write to Liza Lin at Liza.Lin@wsj.com

(END) Dow Jones Newswires

April 30, 2018 02:47 ET (06:47 GMT)

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