Chinese fintech giant Ant Group was expected to make its trading debut in Hong Kong and Shanghai on Thursday at a valuation of roughly $310 billion in the world's largest-ever IPO. The debut would have made the company more valuable than each of China's four major state-owned banks, according to Fortune’s 2020 Global 500 ranking.

On Tuesday, just two days before the planned listing, regulators in Shanghai pulled the plug, at least temporarily.

The Shanghai exchange told Ant in a notice that changes in financial technology regulatory requirements and other "major issues" meant the company didn't meet the requirements needed to list on its exchange.

The news sent shockwaves through the financial world, and came as a surprise to Ant. Just hours before the suspension, the company was still confirming attendees for its planned post-IPO party in Hong Kong, according to Bloomberg.

In a statement on Tuesday, Ant apologized to its investors and said it would "wait for further notice" from the Shanghai stock exchange before making any further announcements on the status of the IPO. It delayed its planned listing in Hong Kong too. Ant did not respond to Fortune's request for comment.

The news throws a wrench in the prospects of Chinese tech firms looking to raise capital. For months now, overseas exchanges have grown increasingly inhospitable for Chinese firms, and markets closers to home—Shanghai, Shenzhen, Hong Kong—have seemed to offer solace. But the mounting problems for Ant offer a sober reminder to Chinese companies that their home turf has its own special set of risks.

Risks at home


For years, China's government has sought to help promote the growth of its tech giants. China's Internet restrictions, collectively referred to as the 'Great Firewall', have insulated Chinese tech from foreign competitors and paved the way for Chinese firms to dominate the domestic market.

Chinese tech giant Tencent, for example, saw its WeChat app become China's go-to social media and messaging platform after Beijing blocked access to American social media sites like Facebook and Twitter.

But that nurturing comes with strings, mainly the mutual understanding that a company will never outgrow the government's grasp. A business can boom—but only to the point that Beijing can still rein it in. The government has a toolkit that keeps companies in-check: messaging via the media outlets it controls and new laws and restrictions that it can impose on a whim.

In 2017, Tencent drew Beijing's ire after its Honor of Kings gaming app was downloaded hundreds of millions of times in China. The People's Daily, the official newspaper of the Chinese Communist Party, blasted the game as "poison" for Chinese society and said it was too addictive. In the days after the People's Daily editorial, Tencent shares dropped over 5% on the Hong Kong stock exchange, costing the company roughly $17.5 billion in market value. China later imposed sweeping reforms on China's mobile gaming industry that included content and playing time restrictions.

Chinese tech giant ByteDance, the parent company of video streaming app TikTok, has had its issues with the Chinese government too.

Earlier this year, ByteDance was engaged in discussions to sell the U.S. operations of TikTok to American companies to comply with the U.S.'s threat to ban the app. As the talks progressed, the Chinese government stepped in and announced new restrictions on exporting artificial intelligence technologies, which immediately made the app less valuable to potential American buyers.

Ant runs afoul


Ant, for its part, seemed to run afoul of Beijing in two ways. First, it claims to be a technology company; in reality, its bread and butter is finance.

Ant is best known for running Alipay, the payment platform of China's e-commerce giant Alibaba. But in the first six months of 2020, Ant derived over half its revenue from financial services, including an array of investment, lending, and insurance products. Its CreditTech service alone accounts for nearly 40% of company revenue.

Ant's financial services have long presented a challenge to China's state-owned banks, which the government relies on to finance its debt and to support its spending.

Specifically, Beijing has taken issue with banks having to underwrite the loans that Ant facilitates between banks and consumers. The day before the IPO suspension, Beijing released a set of draft regulations that would force companies like Ant to use more of its own funds to underwrite the loans. The Financial Times reported on Thursday that the new regulations, which threaten to put a significant dent in Ant's future revenues, were a major reason why regulators postponed the IPO.

Ant's plans to self-distribute shares in its planned IPO also represented a “real challenge” to banking and brokerage interests, said Brock Silvers, chief investment officer at Kaiyuan Capital.

“We don’t know how much of the regulatory pushback was instigated by banking interests, but it wouldn’t be an unreasonable supposition,” Silvers said.

Earlier in the week, a Chinese state-run newspaper Financial News wrote that tech giants like Ant need to be wary of getting too large, warning that any problems they may face could lead to “serious risk contagion” in the Chinese economy.

A second problem for Ant is its founder, the billionaire Jack Ma, who also started Ant's sister company Alibaba. Ma, a teacher turned entrepreneur, is the poster boy for China's technological boom and economic rise, but his public remarks hardly pay deference to Chinese regulators and institutions.

When Ant was still a scrappy upstart in 2008, Ma vowed to disrupt China's financial system. In 2015, he said one of his main goals was to make China's banks and state-owned enterprises "feel unwell."

A week before Ant's listing was delayed, Ma issued another dig at legacy banks and their regulators. In a speech at an industry event, he said Chinese banks guarantee bad loans and are like a "pawn shop," but Chinese regulators have decided that they are too big to fail.

Going abroad


Ant's problems come at a time when Chinese companies face a perilous environment abroad, particularly in the U.S., and seem to be seeking a safe haven at home.

This year, the White House and U.S. Congress have sought to tighten regulatory requirements on Chinese companies listed on U.S. exchanges, a move that may have played a role in Chinese companies like gaming company Netease and video-streaming app Kuaishou opting to list in places like Hong Kong and Shanghai instead of New York. Ant seemed to follow that lead in July 2020, when it announced it was listing in Shanghai and Hong Kong.

Ant has not said publicly whether the hostile U.S. environment motivated its decision to list in China, but the company appears to be on the radar of U.S. authorities. In October, Bloomberg reported that the Trump administration was considering whether to impose restrictions on Ant's financial services payments.

"Ant could face U.S. restrictions once the [U.S. presidential] election is fully resolved," said Silvers. "That would be a blow to the company’s international growth potential just as people are raising questions regarding its domestic business model."

Ant's planned IPO in Hong Kong and Shanghai was initially seen in China as a major vote of confidence in the country's markets, but the delayed debut suggests that Beijing isn't necessarily welcoming the company with open arms.

Given Beijing's power over its market, says Jeffery Towson, a private equity investor and management professor at Peking University, the regulatory risks for Chinese companies "were always more significant domestically" than overseas.