China’s regulators strive to keep up with fast-growing ‘fintech’
Regulators torn between allowing the state-backed system to become irrelevant and wiping out China’s edge as a global financial technology leader
From mobile payments to online lending, China’s boom in “fintech” applications is creating new headaches for regulators used to supervising conventional financial deals.
If regulators stay out of the financial technology explosion, the popularity of non-conventional financial services may make the state-backed financial system irrelevant. That can create huge risks, as was the case in 2015’s stock market rout. But if regulators step in too deep, intervention can easily kill new services and wipe out the advantages China enjoys as a global fintech leader, researchers and industrial executives said at a conference in Beijing early this week.
A “cashless” society is quickly emerging in China. Services provided by Alibaba and Tencent are forcing regulators to impose restrictions and promote the state-backed China UnionPay system to catch up with new payment methods, such as those based on QR code technology. In the credit information field, players like Alipay are accumulating personal credit data quickly, although China’s central bank has declined to issue any formal license. Alibaba owns the South China Morning Post.
Sun Guofeng, head of the research institute with the People’s Bank of China, said at the forum on Monday that China has followed a model of “massive regulation after rapid development” in fintech, meaning regulators have awakened to a completely new type of technology-enabled business.
Mobile payments in China reached US$2.9 trillion last year, according to a United Nations report. That amount is 20 times larger than that of the US and surpasses the gross domestic product of Japan, as hundreds of millions of Chinese consumers change their payment habits.