The People’s Bank of China has issued a strong signal that the Chinese Fintech market will be subject to stronger regulatory scrutiny and controls.
While addressing the 2017 China Internet Finance Forum (2017中国互联网金融论坛) on the topic of financial inclusion, Ji Zhihong (纪志宏), head of the Chinese central bank’s financial markets department, said that when it came to online financing risk, PBOC’s position was that all financial activities needed to be included within the purview of regulation and obtain approval.
Ji said that digital technology brought both new opportunities and challenges to the finance sector, and promised to greatly improve levels of financial inclusiveness within the Chinese economy.
According to Ji traditional financial models find it hard to avoid the constraints and bottlenecks of high costs, low efficiency and difficulty achieving commercial sustainability that characterise financial inclusion.
Within the Chinese market, however, a key issue for financial inclusion was protecting people who had only a low level of financial inclusion and ability to withstand losses.
“While engaging in innovation, [we] must find a path to resolving the problem of the losses caused by asymmetric information and financial activities in breach of laws and regulations.”
For these reasons Ji pointed to the need to establish a conduct regulatory system, a prudential regulatory system and market entry system for the online finance sector.
Ji said that the next steps for financial risk work would be making the prevention of systemic financial risk the “bottom line,” improving the legal and regulatory framework, innovation of regulatory methods, and the implementation of thorough regulation in accordance with the principle that “substance is greater than form.”