Ant Financial starts arbitration against Junzheng

Alibaba's affiliated company Ant Financial Service Group has initiated an arbitration action against Inner Mongolia Junzheng Energy & Chemical Industry Co for failing to fulfill its promised investment in Tianhong Asset Management Co, said Ant Financial.

Ant Financial and Junzheng, both shareholders of Tianhong, agreed in October 2013 to increase their investments in Tianhong, said Junzheng in a filing on the Shanghai bourse.

As of June 27, 2014, Ant Financial had paid all its subscription capital, but Junzheng failed to pay its investment amount of 69.43 million yuan ($11.19 million) and requested that Tianhong and related shareholders to suspend the increase in capital and share due to "questions in State-owned assets evaluation," according to Ant Financial's statement e-mailed to the Global Times Sunday.

The ownership enlargement was approved by State-owned Assets Supervision and Administration of Tianjin government in December 2012, the statement said.

The investment increase plan needs approval from the Tianjin authorities because one of Tianhong's shareholders, Tianjin Trust, is a State-owned company.

Ant Financial said that it had tried to negotiate with Junzheng on the investment issue during July to November 2014 but had been rejected, noting afterward that Ant Financial had to take the issue to the China International Economic and Trade Arbitration Commission.

Tianhong has grown from near obscurity to operating China's biggest money market fund in just several months after it and Alibaba jointly launched a fund platform Yu'ebao in June 2013.

Ant Financial said that the dispute with Junzheng is only an issue between shareholders and will not affect the operations of Yu'ebao.

Junzheng, which won a bid for a 15.3 percent stake in Huatai Insurance Group for 4.5 billion yuan ($725.3 million) in November 2014, could not be reached for comment by press time.