Chinese Regulators Step up Focus on Fintech with 1828 Fines in 2017


The People’s Bank of China, China Banking Regulatory Commission, China Insurance Regulatory Commission and China Securities Regulatory Commission have jointly issued a total of 1,828 fines thus far this year, with a heavy focus on Fintech-related infractions such as information disclosures and Internet lending and payments.

Shang Zhenyu, the CEO of China Post Securities, said to Securities Daily that the shift in the punitive focus of regulators this year was primarily due to the growth of Fintech operations involving the Internet and mobile smart devices.

This has led to the transformation of traditional financial operations into Internet finance and mobile finance activities, for which regulatory measures in China remain comparatively weak.

Crowdfunding, P2P online lending, third party payments and big data have all seen flourishing growth in China of late due to comparatively low costs and lax regulation.

While the proliferation of innovative Fintech operations in China has the potential to raise financial inclusiveness and efficiency, it has also raised strong concerns amongst regulators about the immense risks involved and the potential for fraudulent conduct.

In April 2016 the State Council launched special rectification work in relation to the flourishing growth of Fintech in China, involving the participation of a total of 17 central government ministries and commissions including the PBOC, CBRC, CIRC and CSRC, as well as the Ministry of Finance, the Ministry of Public Security and the National Development and Reform Commission.

Concerns about risk in relation to Fintech have just prompted the central government to declare the use of cryptocurrencies for crowdfunding purposes to be an illegal form of financial activity, putting the kibosh on any initial coin offerings in future.

Cao Xiao, professor of banking at the Shanghai University of Finance and Economics, said to Securities Daily  that regulators can be expected to have lower tolerance for risk-fraught innovation in future, as exemplified by the frequent issuance of new provisions in relation to Internet lending and payments.

According to Cao China’s authorities have taken a heavy-handed approach to financial regulation ever since the US sub-prime crisis, while Chinese financial institutions continue suffer from an insufficient level of self-discipline.

In Shang Zhenyu’s estimation Chinese regulators will need to better educate the public about the risks involved in online investment and the potential for Fintech to be employed for fraudulent ends.