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Best Sellers Sell the Best Because They’re Best Sellers

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On a Tuesday in mid-March, the most powerful executive in American publishing slid into a booth at a restaurant on Central Park South for her last power lunch of the pre-pandemic era.

New York City was about to shut down, and over octopus pasta Madeline McIntosh, the U.S. chief executive of Penguin Random House, described the contingency plan she was developing for her roughly 4,400 employees — the editors, copy editors, sales operatives, cover designers, marketers, publicists, illustrators, audio engineers, coders, warehouse managers, typesetters and other book professionals who populate what is by far the largest publishing company in the United States.

For Ms. McIntosh, 51, whose rise began with a temp job, and who shocked literary stalwarts by once taking a job with Amazon, the switch to remote work was only the first in a gantlet of catastrophes. On top of the pandemic-induced recession, there have been intense political and social upheaval, an industrywide outcry over the lack of racial diversity in publishing, mass bookstore closures, major disruptions at the printing presses and more.

“It did feel like every hour and every day was bringing more bad news and more uncertainty related to the supply chain and retail,” a remarkably composed Ms. McIntosh said in August, over video chat. “Would we be able to print books? Would we be able to ship books? Would we be able to sell books?”

ImageMasked warehouse workers in Maryland. Madeline McIntosh runs the only publisher that ships books seven days a week.
Credit…Melissa Lyttle for The New York Times

To almost everyone’s surprise, the answer to those unnerving questions, at least for the moment, has been: Yes. After a steep drop at the start of the pandemic, book sales not only recovered but surged. Unit sales of print books are up nearly 6 percent over last year, according to NPD BookScan, and e-book and digital audiobook sales have risen by double digits. Reading, it turns out, is an ideal experience in quarantine.

“People were watching a lot of Netflix, but then they needed a break from Netflix,” Ms. McIntosh said. “A book is the most uniquely, beautifully designed product to have with you in lockdown.”

As the industry’s Goliath — as big as the four other biggest publishers combined, analysts say, with authors from Barack and Michelle Obama to Toni Morrison — Penguin Random House has fared better than some of its rivals. Of the 20 best-selling print books of 2020, eight (by far the largest share) are Penguin Random House titles, according to NPD BookScan. It has had 216 New York Times best sellers this year. Penguin Random House’s U.S. sales grew 5.2 percent in the first half of the year, helping to soften a global sales dip of around 1 percent, according to an earnings report from its parent, the German conglomerate Bertelsmann. Overall sales at several other major publishers — Simon & Schuster, HarperCollins and Houghton Mifflin Harcourt — all fell further, according to filings.

While no one expected a pandemic, Penguin Random House was, in a weird way, prepared for the new retail reality. The company has grown even more dominant in recent months in part because Ms. McIntosh, who took over two and a half years ago, and other leaders foresaw a future in which online book sales would vastly outstrip physical retail, but print books would continue to be a popular and lucrative format.

For years, the company had been investing in infrastructure, spending $100 million on expanding and upgrading its warehouses. With four distribution centers and warehouses on both coasts and in the Midwest, it is the only publisher that ships books seven days a week. That supply-chain advantage enables Penguin Random House to quickly react to upticks in demand for particular titles, which has not only increased sales but cut down on returns of unsold books by 30 percent.

Credit…Melissa Lyttle for The New York Times

Early in the shutdown, when Amazon was delaying book deliveries to focus on shipping essential items like cleaning supplies and food, Penguin Random House directly fulfilled some of the Amazon orders on its own, helping mitigate delays.

“By dominating all of the levers in publishing, they’re almost untouchable,” said Thad McIlroy, a publishing industry analyst. “Penguin Random House can get more books on the shelves than their competitors, at a time when the distribution market is disrupted.”

In publishing, as in other industries, the pandemic has accelerated forces that were already at play, delivering several years’ worth of change in just a few months. The big houses aren’t competing just against one another; they’re vying for the public’s attention against TikTok, Netflix and Facebook. Penguin Random House has built what is probably the most sophisticated direct-to-consumer online marketing and data operation in the industry, with a proprietary research operation that tracks 100,000 book buyers across the country.

This spring, the company upgraded its ability to sell books directly from its own website, bypassing bookstores, a move that could alienate big retail partners. When the coronavirus changed book-buying habits overnight, driving purchases almost entirely online, Penguin Random House was ready.

“Without knowing it, we’ve been planning to operate in this market for years,” Ms. McIntosh said. “We have the biggest list of books, we have access to the most data, so we could have a very accurate view on a daily basis of how consumer demand was shifting. We could see right away when people were grabbing the sourdough bread book, or the birding book, or the inspirational book, or the book that put this moment in the context of history.”

On Thursday, Penguin Random House announced that it would release Mr. Obama’s memoir in November, with an initial run of three million copies. It is virtually guaranteed to be the biggest book of the year.

As publishing becomes even more of a winner-take-all business, Penguin Random House’s dominance represents the culmination of decades-long trends that have made the industry more profit focused, consolidated, undifferentiated and averse to risk.

Like Hollywood, which pours resources into universe-scale superhero franchises that are nearly guaranteed to get an audience, publishing has become increasingly reliant on blockbusters — a development that has left beginner and midlist authors struggling. Mass-market retailers like Target, Walmart and Costco — whose share of book sales has soared during the pandemic — buy books that are surefire hits, and often wait for an unproven author to hit the best-seller list before they even order copies.

“There are a few winners and there are far, far fewer books around the break-even point, and there are more that lose,” said Mike Shatzkin, the founder and chief executive of Idea Logical, which analyzes the book business. “The medium-sized publishers can’t sustain themselves anymore. They can’t compete for the really big titles, so they get bought.”

The shift to online retail amplifies the trend. Amazon’s algorithms showcase books that are already selling well, so more people see those books and more people buy them. Publishers have less control over what readers see online than what they encounter in a store, so they funnel more marketing and advertising dollars into titles that are preordained successes.

“The impact on literary culture is more homogenization, which is only going to accelerate now,” said Dennis Johnson, a co-publisher of Melville House, an independent press.

Credit…Richard Drew/Associated Press

The result is an algorithmic marketplace that serves up mostly the hits, driving a cycle so self-fulfilling it’s nearly tautological: Best sellers sell the best because they are best sellers.

Under Ms. McIntosh, Penguin Random House has flourished in this climate. In an industry that’s still to a degree shaped by instinct-driven gambles on the next literary breakthrough, Ms. McIntosh comes across as reserved, calm and hyper-rational, more inclined to base a decision on numbers than on relationships, institutional habits or hunches.

“She’s not showy, but she’s incredibly influential,” said the literary agent Suzanne Gluck, who considers Ms. McIntosh a friend. “She keeps pushing the company to use data better, to use their corporate divisions better, to use their size better. She doesn’t have ‘rest on laurels’ as a gear.”

As she has pushed to make Penguin Random House more data-driven, hit-focused and efficient, Ms. McIntosh has, in her unassuming way, had an outsize impact on how the industry operates. It sets her apart in an ecosystem that has long elevated bookish, creative types to its top executive roles, with legendary editors like Sonny Mehta, Robert Gottlieb and Nan Talese operating independent literary fiefs, with freedom to acquire and publish whatever they liked.

During her tenure, Ms. McIntosh has overseen a spate of acquisitions, making her a little like Eric Carle’s Very Hungry Caterpillar: The company bought F+W Books, a publisher of illustrated nonfiction, and a 45 percent stake in the independent publisher Sourcebooks. (It also bought the intellectual property rights to “The Very Hungry Caterpillar.”)

Penguin Random House, which was valued at $3.67 billion in 2019, could get even bigger. Anticipating another wave of media consolidation, Bertelsmann recently announced its interest in buying Simon & Schuster, which Viacom put up for sale this spring for $1.2 billion.

Even if a rival spends more to get Simon & Schuster, it will be hard for anyone to catch up with Penguin Random House. “There is no No. 2. There’s only No. 1,” Mr. McIlroy said.

Because of its enormous publishing program, with more than 300 imprints globally and a backlist going back nearly a century, the publisher leads the literary world on seemingly every axis, from the highest-brow fiction to pulpy commercial authors. It publishes Nobel Prize winners like Kazuo Ishiguro and Alice Munro; Pulitzer Prize winners like Colson Whitehead, Anne Tyler and Jon Meacham; and prose deities who shaped 20th-century American literature, including Cormac McCarthy, John Cheever, Eudora Welty, Saul Bellow, William Faulkner, John Updike and Joan Didion. It publishes blockbuster authors like Dan Brown, E L James, John Grisham and Danielle Steel. It publishes mega-best-selling children’s and young adult authors like Dr. Seuss and John Green. It publishes the Obamas, whose memoirs Penguin Random House acquired with a record-breaking $65 million advance.

When the coronavirus hit, Ms. McIntosh left her Manhattan home, a recently acquired apartment in the Dakota, for a second property in Orient, at the extremity of the North Fork of Long Island. She has ridden out the pandemic there with her husband, the thriller writer Chris Pavone; their teenage twin boys; and a Labradoodle named Wally.

Mr. Pavone is published by Crown, a Penguin Random House imprint. The couple say they observe a strict separation of “church and state” when it comes to his career: Her only involvement is reading early drafts and passing along encouragement. Most days, he cooks dinner for their family, and enjoys their household division of labor — their sons see a father who’s around for homework help and a mother who’s a C.E.O.

To unwind, he told me, Ms. McIntosh “bakes maniacally” on the weekends. As Covid-19 began to spread, she bought 100 pounds of flour, which she steadily converted into bread, cookies, pies and cakes, though she took a hiatus after breaking her hand in a paddle-boarding accident this summer.

In some ways, Ms. McIntosh’s ascent has been typical — a steady climb up the corporate ladder. But she also stands out as someone who at every turn has rejected conventional thinking, and who has had an uncanny degree of foresight about technological change.

The daughter of an arts administrator and a banker, she grew up in St. Paul, Minn., and Pittsburgh, and studied fine arts at Harvard, hoping at first to become a curator. She took the Radcliffe Publishing Course instead, leading to a toehold in the industry as a temporary assistant to an editor at HarperCollins, then to a permanent position at Norton.

By 1994, Ms. McIntosh saw that the internet would irreversibly transform publishing, and that year she got a job in the new-media department at Bantam Doubleday Dell, a division of Bertelsmann. Her work involved creating proposals to convert texts to CD-ROM and developing and managing the company’s first website. Eventually, she was put in charge of online sales — a small fraction of the business, but one she suspected would grow. Her first task was to set up an account for Amazon, when no one really knew what it was, a bookstore or a distributor.

“She understood it differently than most people,” said Don Weisberg, then a sales chief who became a mentor. “She saw what Amazon was going to be, and she saw that we needed to deal with it.”

Mr. Weisberg eventually promoted Ms. McIntosh to run adult sales for all of Random House, a powerful position. After seven years, she became the head of Random House Audio — a move some saw as a self-inflicted demotion.

Credit…Penguin Random House Audio

“You were going from the nerve center of the company to the fringe,” Ms. McIntosh said. “There were a few times in my early career that people thought I was a little bit crazy.”

At the time, audio sales were a small slice of the business — and digital audio sales were tinier yet — but Ms. McIntosh anticipated a boom.

“Madeline said, ‘We need to build a digital archive and distribution system,’ and we were like, ‘What?’” said Amanda D’Acierno, who worked for Ms. McIntosh and currently heads the audio division at Penguin Random House. “She said, ‘One day it’s all going to be digital.’” (That has largely proved true. With astronomic growth in recent years, digital audiobooks are the fastest-growing format in books.)

In 2008, Ms. McIntosh made an even more radical move. Wanting to understand the technological transformation of publishing, she went to work for Amazon in Luxembourg, as director of content for the international rollout of the Kindle e-reader. Many of her former colleagues viewed the company with suspicion, if not contempt, as a would-be monopoly and an existential threat. But Ms. McIntosh thrived there.

“Amazon gave me the experience of being fully immersed in a culture where all the decisions were driven by the data,” she said. “That gave me the confidence that, hey, I can do this, too, and that it could be freeing. The good thing about doing things by math is that it diminishes the politics of a situation.”

After a year and a half, Markus Dohle — the gregarious, grinning and optimistic chief executive of Random House in the United States — made an enticing offer: to “come home” to a position created just for Ms. McIntosh, as the company’s president of sales, operations and digital. She took it. Random House merged with Penguin in 2013, and she became chief executive of the company’s U.S. business five years later. (Mr. Dohle is the global C.E.O.)

She was seen as a natural successor, yet she operates from a different vantage from that of many of her peers, who base decisions on deckle-edged intuition.

“The media culture historically has been about ‘How vigorously can I persuade you to my point of view?’” Ms. McIntosh told me during an interview in her office last year. “And I may end up persuading you simply through my eloquence or my passion, and that could translate into actually making the wrong decision.”

Almost everyone I spoke to about Ms. McIntosh described her as curious — more likely in meetings to probe for information than deliver imperatives.

“She’ll pause, and then she’ll ask you this extremely insightful question that becomes your answer,” said Annette Danek-Akey, executive vice president of the company’s supply chain.

But in a business that’s still, to a surprising degree, built on personal relationships forged over long, boozy lunches, some see Ms. McIntosh as analytical and sometimes hard to read — a framing that would not, perhaps, be applied to a male C.E.O. (The other Big Five chiefs are all men.)

Credit…Rebecca Smeyne for The New York Times

Mr. Weisberg, who was recently promoted to chief executive of Macmillan, one of publishing’s Big Five, said his protégé had perhaps the hardest job in publishing, in managing a huge company and facing pressure to make it even bigger. “I don’t envy her on a day-to-day basis,” he said.

In her relatively brief time at the top, Ms. McIntosh has made some unpopular management moves, including a reorganization and a decision to close some of the company’s most prestigious imprints. In 2018, she combined the Crown and Random House divisions, which strengthened the pipeline of popular nonfiction, a growing category — but also pushed out some of the company’s most influential editors and tastemakers, including Molly Stern, Julie Grau and Cindy Spiegel. If Ms. McIntosh has made Penguin Random House more streamlined and profitable, she also risks weakening its ability to spot breakout literary talent.

She has also had to navigate tragedies — the deaths of the revered editors Susan Kamil and Sonny Mehta, and the politically fraught succession that ensued. Recently, two other big-name editors announced their retirements: Gerry Howard (her former boss at Norton) and Nan Talese, who shaped the careers of writers like Margaret Atwood, Ian McEwan, Jennifer Egan and Pat Conroy. At the end of an era in American literature, it’s unclear who — if anyone — will fill the void.

One imperative is to make the next generation more diverse. The company recently published a report acknowledging that its work force is 79 percent white.

“I feel and fully acknowledge the lack of progress in our company and in our industry,” Ms. McIntosh said during a companywide video address this summer. “We are not where we want to be.”

After weathering the shutdown better than anyone anticipated, Penguin Random House now confronts an unexpected challenge. People are buying so many books that the two biggest printers in the United States can’t produce enough copies. Penguin Random House and other publishers have had to delay some fall titles into 2021, including books by prominent authors like Martin Amis and Jo Nesbo. The enormous print run for Mr. Obama’s memoir will likely make the logjams even worse — especially as the holiday shopping season arrives. Ms. McIntosh and others worry about a resurgence of coronavirus infections that could cause warehouse, printer and bookstore closures.

Ms. McIntosh also faces a more entrenched problem: how to keep growing when you’re already gigantic. Investors expect a rise in year-over-year earnings, and one path is through acquisitions of smaller publishers.

Another is to keep publishing huge best sellers, which can be a gamble, and an expensive one. The company’s best-selling book of 2020 is the novel “Where the Crawdads Sing” — which came out in 2018. Other current top movers include the backlist titles “Becoming” (2018), “Little Fires Everywhere” (2017), “Oh, the Places You’ll Go!” (1990), and “The Very Hungry Caterpillar” (1969).

Credit…Erik Tanner for The New York Times

The books make money, but the trend is worrying. Every dollar plowed into printing and marketing older titles comes at the expense of discovering and promoting new writers, causing a sort of slow stagnation of literary culture. Talented English majors don’t accept underpaid jobs in publishing to move inventory; they dream of discovering the next James Baldwin or Alice Munro.

“They’re not going to have the next wave of books sitting in the backlist if they take away the lesson that they don’t need anything other than the big books,” said Michael Cader, the founder of Publishers Marketplace, a trade publication.

For Ms. McIntosh, who absorbed a customer-centric approach during her time at Amazon, the biggest priority during the pandemic has been getting readers the books they want. And what many of them want are books that other people already bought.

So far, it’s working. “We might be focused on the book we published 20 years ago instead of the book we’ll publish next week,” she said. “When the outside world is very chaotic, you want the tried and true.”

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The Trump campaign celebrated a growth record that Democrats downplayed.

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The White House celebrated economic growth numbers for the third quarter released on Thursday, even as Joseph R. Biden Jr.’s presidential campaign sought to throw cold water on the report — the last major data release leading up to the Nov. 3 election — and warned that the economic recovery was losing steam.

The economy grew at a record pace last quarter, but the upswing was a partial bounce-back after an enormous decline and left the economy smaller than it was before the pandemic. The White House took no notice of those glum caveats.

“This record economic growth is absolute validation of President Trump’s policies, which create jobs and opportunities for Americans in every corner of the country,” Mr. Trump’s re-election campaign said in a statement, highlighting a rebound of 33.1 percent at an annualized rate. Mr. Trump heralded the data on Twitter, posting that he was “so glad” that the number had come out before Election Day.

The annualized rate that the White House emphasized extrapolates growth numbers as if the current pace held up for a year, and risks overstating big swings. Because the economy’s growth has been so volatile amid the pandemic, economists have urged focusing on quarterly numbers.

Those showed a 7.4 percent gain in the third quarter. That rebound, by far the biggest since reliable statistics began after World War II, still leaves the economy short of its pre-pandemic levels. The pace of recovery has also slowed, and now coronavirus cases are rising again across much of the United States, raising the prospect of further pullback.

“The recovery is stalling out, thanks to Trump’s refusal to have a serious plan to deal with Covid or to pass a new economic relief plan for workers, small businesses and communities,” Mr. Biden’s campaign said in a release ahead of Thursday’s report. The rebound was widely expected, and the campaign characterized it as “a partial return from a catastrophic hit.”

Economists have warned that the recovery could face serious roadblocks ahead. Temporary measures meant to shore up households and businesses — including unemployment insurance supplements and forgivable loans — have run dry. Swaths of the service sector remain shut down as the virus continues to spread, and job losses that were temporary are increasingly turning permanent.

“With coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower,” Paul Ashworth, chief United States economist at Capital Economics, wrote in a note following the report.

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Black and Hispanic workers, especially women, lag in the U.S. economic recovery.

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The surge in economic output in the third quarter set a record, but the recovery isn’t reaching everyone.

Economists have long warned that aggregate statistics like gross domestic product can obscure important differences beneath the surface. In the aftermath of the last recession, for example, G.D.P. returned to its previous level in early 2011, even as poverty rates remained high and the unemployment rate for Black Americans was above 15 percent.

Aggregate statistics could be even more misleading during the current crisis. The job losses in the initial months of the pandemic disproportionately struck low-wage service workers, many of them Black and Hispanic women. Service-sector jobs have been slow to return, while school closings are keeping many parents, especially mothers, from returning to work. Nearly half a million Hispanic women have left the labor force over the last three months.

“If we’re thinking that the economy is recovering completely and uniformly, that is simply not the case,” said Michelle Holder, an economist at John Jay College in New York. “This rebound is unevenly distributed along racial and gender lines.”

The G.D.P. report released Thursday doesn’t break down the data by race, sex or income. But other sources make the disparities clear. A pair of studies by researchers at the Urban Institute released this week found that Black and Hispanic adults were more likely to have lost jobs or income since March, and were twice as likely as white adults to experience food insecurity in September.

The financial impact of the pandemic hit many of the families that were least able to afford it, even as white-collar workers were largely spared, said Michael Karpman, an Urban Institute researcher and one of the studies’ authors.

“A lot of people who were already in a precarious position before the pandemic are now in worse shape, whereas people who were better off have generally been faring better financially,” he said.

Federal relief programs, such as expanded unemployment benefits, helped offset the damage for many families in the first months of the pandemic. But those programs have mostly ended, and talks to revive them have stalled in Washington. With virus cases surging in much of the country, Mr. Karpman warned, the economic toll could increase.

“There could be a lot more hardship coming up this winter if there’s not more relief from Congress, with the impact falling disproportionately on Black and Hispanic workers and their families,” he said.

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Ant Challenged Beijing and Prospered. Now It Toes the Line.

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As Jack Ma of Alibaba helped turn China into the world’s biggest e-commerce market over the past two decades, he was also vowing to pull off a more audacious transformation.

“If the banks don’t change, we’ll change the banks,” he said in 2008, decrying how hard it was for small businesses in China to borrow from government-run lenders.

“The financial industry needs disrupters,” he told People’s Daily, the official Communist Party newspaper, a few years later. His goal, he said, was to make banks and other state-owned enterprises “feel unwell.”

The scope of Mr. Ma’s success is becoming clearer. The vehicle for his financial-technology ambitions, an Alibaba spinoff called Ant Group, is preparing for the largest initial public offering on record. Ant is set to raise $34 billion by selling its shares to the public in Hong Kong and Shanghai, according to stock exchange documents released on Monday. After the listing, Ant would be worth around $310 billion, much more than many global banks.

The company is going public not as a scrappy upstart, but as a leviathan deeply dependent on the good will of the government Mr. Ma once relished prodding.

More than 730 million people use Ant’s Alipay app every month to pay for lunch, invest their savings and shop on credit. Yet Alipay’s size and importance have made it an inevitable target for China’s regulators, which have already brought its business to heel in certain areas.

These days, Ant talks mostly about creating partnerships with big banks, not disrupting or supplanting them. Several government-owned funds and institutions are Ant shareholders and stand to profit handsomely from the public offering.

The question now is how much higher Ant can fly without provoking the Chinese authorities into clipping its wings further.

Excitable investors see Ant as a buzzy internet innovator. The risk is that it becomes more like a heavily regulated “financial digital utility,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”

“Utility stocks, as far as I remember, were not the ones to be seen as the most exciting,” Mr. Howie said.

Ant declined to comment, citing the quiet period demanded by regulators before its share sale.

The company has played give-and-take with Beijing for years. As smartphone payments became ubiquitous in China, Ant found itself managing huge piles of money in Alipay users’ virtual wallets. The central bank made it park those funds in special accounts where they would earn minimal interest.

After people piled into an easy-to-use investment fund inside Alipay, the government forced the fund to shed risk and lower returns. Regulators curbed a plan to use Alipay data as the basis for a credit-scoring system akin to Americans’ FICO scores.

China’s Supreme Court this summer capped interest rates for consumer loans, though it was unclear how the ceiling would apply to Ant. The central bank is preparing a new virtual currency that could compete against Alipay and another digital wallet, the messaging app WeChat, as an everyday payment tool.

Ant has learned ways of keeping the authorities on its side. Mr. Ma once boasted at the World Economic Forum in Davos, Switzerland, about never taking money from the Chinese government. Today, funds associated with China’s social security system, its sovereign wealth fund, a state-owned life insurance company and the national postal carrier hold stakes in Ant. The I.P.O. is likely to increase the value of their holdings considerably.

“That’s how the state gets its payoff,” Mr. Howie said. With Ant, he said, “the line between state-owned enterprise and private enterprise is highly, highly blurred.”

China, in less than two generations, went from having a state-planned financial system to being at the global vanguard of internet finance, with trillions of dollars in transactions being made on mobile devices each year. Alipay had a lot to do with it.

Alibaba created the service in the early 2000s to hold payments for online purchases in escrow. Its broader usefulness quickly became clear in a country that mostly missed out on the credit card era. Features were added and users piled in. It became impossible for regulators and banks not to see the app as a threat.

ImageAnt Group’s headquarters in Hangzhou, China.
Credit…Alex Plavevski/EPA, via Shutterstock

A big test came when Ant began making an offer to Alipay users: Park your money in a section of the app called Yu’ebao, which means “leftover treasure,” and we will pay you more than the low rates fixed by the government at banks.

People could invest as much or as little as they wanted, making them feel like they were putting their pocket change to use. Yu’ebao was a hit, becoming one of the world’s largest money market funds.

The banks were terrified. One commentator for a state broadcaster called the fund a “vampire” and a “parasite.”

Still, “all the main regulators remained unanimous in saying that this was a positive thing for the Chinese financial system,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.

“If you can’t actually reform the banks,” Mr. Chorzempa said, “you can inject more competition.”

But then came worries about shadowy, unregulated corners of finance and the dangers they posed to the wider economy. Today, Chinese regulators are tightening supervision of financial holding companies, Ant included. Beijing has kept close watch on the financial instruments that small lenders create out of their consumer loans and sell to investors. Such securities help Ant fund some of its lending. But they also amplify the blowup if too many of those loans aren’t repaid.

“Those kinds of derivative products are something the government is really concerned about,” said Tian X. Hou, founder of the research firm TH Data Capital. Given Ant’s size, she said, “the government should be concerned.”

The broader worry for China is about growing levels of household debt. Beijing wants to cultivate a consumer economy, but excessive borrowing could eventually weigh on people’s spending power. The names of two of Alipay’s popular credit functions, Huabei and Jiebei, are jaunty invitations to spend and borrow.

Huang Ling, 22, started using Huabei when she was in high school. At the time, she didn’t qualify for a credit card. With Huabei’s help, she bought a drone, a scooter, a laptop and more.

The credit line made her feel rich. It also made her realize that if she actually wanted to be rich, she had to get busy.

“Living beyond my means forced me to work harder,” Ms. Huang said.

First, she opened a clothing shop in her hometown, Nanchang, in southeastern China. Then she started an advertising company in the inland metropolis of Chongqing. When the business needed cash, she borrowed from Jiebei.

Online shopping became a way to soothe daily anxieties, and Ms. Huang sometimes racked up thousands of dollars in Huabei bills, which only made her even more anxious. When the pandemic slammed her business, she started falling behind on her payments. That cast her into a deep depression.

Finally, early this month, with her parents’ help, she paid off her debts and closed her Huabei and Jiebei accounts. She felt “elated,” she said.

China’s recent troubles with freewheeling online loan platforms have put the government under pressure to protect ordinary borrowers.

Ant is helped by the fact that its business lines up with many of the Chinese leadership’s priorities: encouraging entrepreneurship and financial inclusion, and expanding the middle class. This year, the company helped the eastern city of Hangzhou, where it is based, set up an early version of the government’s app-based system for dictating coronavirus quarantines.

Such coziness is bound to raise hackles overseas. In Washington, Chinese tech companies that are seen as close to the government are radioactive.

In January 2017, Eric Jing, then Ant’s chief executive, said the company aimed to be serving two billion users worldwide within a decade. Shortly after, Ant announced that it was acquiring the money transfer company MoneyGram to increase its U.S. footprint. By the following January, the deal was dead, thwarted by data security concerns.

More recently, top officials in the Trump administration have discussed whether to place Ant Group on the so-called entity list, which prohibits foreign companies from purchasing American products. Officials from the State Department have suggested that an interagency committee, which also includes officials from the departments of defense, commerce and energy, review Ant for the potential entity listing, according to three people familiar with the matter.

Ant does not talk much anymore about expanding in the United States.

Ana Swanson contributed reporting.

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