And China has become a magnet for fintech investments, with the total growing from US$900 million in the second half of 2020 to more than US$1.3 billion in the first half of 2021, according to an analysis by accounting firm KPMG.

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In China, mobile payments are not only used by the relatively tech-savvy urban population, but also increasingly by people in rural areas.

Data from audit firm Ernst & Young, published in June, showed that mainland China had the highest penetration rate of fintech services among major economies, at 87 per cent, according to its 2019 index.

The rate was about 67 per cent in Hong Kong, Singapore and South Korea.

China also leads in terms of small and medium-sized enterprises adopting fintech services, among major and emerging economies.

Experts attribute this, for the most part, to China’s economy skipping the credit card phase between cash and digital payments.

“China has all the ingredients for high fintech penetration: network infrastructure, high smartphone penetration, and an analogue financial system that provided poor service, allowing it to leapfrog to purely digital payments on smartphones,” said Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics.

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“The People’s Bank of China correctly decided that China needed to further digitise its financial system, and that big tech could do this better than the banks. This resulted in Alipay and WeChat Pay launching in 2014 and fundamentally changing payment in China,” he told the Post.

China’s major cities are considered top hubs for fintech services. In the London-based think tank Z/Yen’s Global Financial Centres Index 30 report, published in October, China had three cities among the world’s top 10 fintech centres, with Shanghai listed second after New York, followed by Beijing at fifth and Shenzhen at seventh.

Seoul and Tokyo, the capitals of neighbouring economies South Korea and Japan, lagged behind at 11th and 16th, respectively.

China has reached the stage where technologies such as big data, cloud computing, artificial intelligence and blockchain have all been applied to fintech.

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The government mostly allowed tech companies to develop their services and grow exponentially, until recent years when it began tightening the regulatory screws.

Authorities’ widening clampdown on platform giants – ranging from anti-competition practices to data-security breaches and abuse of algorithms – is expected to curb the growth of these companies, according to analysts.

The stronger regulatory stance is seen by some as the government seeking to undermine the dominance of tech firms while assuming a greater role in the fintech scene.

But experts said the regulations could have positive effects as well.

“China’s fintech sector is under a cloud of increasing regulation in the data and financial space, which will provide headwinds, but it is possible that the restraints on the top firms will allow a more robust ecosystem of niche players to grow,” Chorzempa said.

“It makes clear not just that China must seize opportunities, and not just in fintech, but for everything from e-commerce to broadband internet,” Turrin said.

“The entire nation is focused on digital. That’s why it will be tough for other countries to keep up with China’s fintech, and even harder for them to surpass this.”