Does China’s Army of Fintech Start-ups Pose Systemic Risk?

A leading Chinese investor says the vast number of start-ups thronging the fintech sector poses a major risk that will prompt authorities to step up regulation in 2019.

Vince Zhang, president of investment platform Phoenix Finance, said that China is host to tens of thousands of fintech companies who do possess adequate risk controls or management, with the potential to become “a very big risk.”

Zhang made the remarks at CNBC’s East West Conference in the Nansha district of Guangzhou on 29 November.

“A lot of companies are not (there) in terms of their business plan, in terms of their risk management process, in terms of their overall management,” said Zhang to Louise Lucas from the Financial Times.

“A lot of these corporate control mechanisms are not in place…for anything related to financial services (this is) pretty dangerous.

“Without proper risk control mechanism personnel, without proper ways of communicating with regulation, it’s potentially becoming a very big risk going forward.”

Zhang anticipates tighter regulation of the Chinese fintech sector next year, as well as a pruning of the industry.

“I would predict in 2019 it’s becoming more regulated…there will be less and less players in this field.”

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