China’s fintech dilemma — beloved by small business, distrusted by regulators
- Tailor-made financial platforms have been embraced by smaller enterprises as an alternative to China’s state behemoths
- Their higher levels of risk, however, have made them an easy target for regulators as concerns mount over systemic vulnerabilities
In years past, Cheng Cunwang – an organic farmer who has been cultivating crops for more than a decade on the outskirts of Beijing – would have had few options for financing outside China’s massive state institutions.
Dealing with the paperwork those giants require for potential borrowers, a process Cheng sees as a waste of time and effort, is a considerable hurdle compared to the smoother, more streamlined operations of smaller banks and fintech firms.
A loan of 1 million yuan (US$136,651) would be more than enough for his agricultural firm to maintain a healthy cash flow, Cheng said, and that sum is quickly accessible via a platform like MYbank, the online bank backed by Ant Group.
“As a small firm, we want financial services that are flexible and fast,” he said.
While demand from small businesses has driven the rise of financial technology companies in China, the emerging industry’s expansion may be on pause as Beijing has pledged to scrutinise them more carefully to soothe worries of systemic risk.
The financial system should be a comprehensive one, instead of being concentrated on a few participants