A leading academic researcher says the crackdown on the financial sector recently flagged by China’s banking regulator will place a heavy emphasis upon Fintech activity.
Earlier this week Wang Zhaoxing (王兆星), vice-head of the China Banking Regulatory Commission, said to Xinhua that the authority will launch a “planned, step-by-step, in-depth correction of market malfeasance,” as well as “strike hard against the slovenly handling of finance, illegal fund-raising and other forms of illegal financial activity, and strictly standardise transaction conduct on financial markets.”
Wang said that in future, “regulatory standards will become higher and higher, regulation will become more and more strict, and the punishments for regulatory and legal breaches as well as imprudent operating conduct will increase.”
Dong Ximiao (董希淼), a senior researcher at Renmin University’s Chongyang Institute of Finance, said to Securities Daily that CBRC is signalling the start of a new crackdown on risk-fraught forms of illicit financial activity, that will build upon the momentum of the “regulatory storm” launched by the banking regulator in March.
According to Dong the upcoming regulatory crackdown will focus on five key areas, with a special emphasis upon Fintech-related activity.
CBRC will launch a clean-up of online financing directed in particular at P2P lending and micro-lending, that will involve amendments to the administrative measures for micro-loan companies and the suspension of approvals for new online platforms.
The banking regulator will also strike at certain illicit forms of fund-raising that spruik themselves using Fintech rubric, following the precedent set by the Chinese central bank’s crackdown on initial coin offerings launched earlier this year.
Other focal areas will include stricter thresholds for market entry, with the requirements that set qualifications be obtained in order to engage in financial operations, and greater standardisation of corporate financing.
The upcoming crackdown will focus more on illicit financial institutions, with Dong pointing out that the “regulatory storm” launched by CBRC towards the end of March primarily targeted established financial institutions in the banking sector, with the goal of curbing profligate leverage, interbank borrowing and regulatory arbitrage.
Dong says this earlier financial crackdown has achieved considerable successes, with a marked decline in the issuance of bank wealth management products and interbank lending.
The latest data from CBRC indicates that as of the end of October interbank assets and interbank liabilities fell by 3.4 trillion yuan and 1.4 trillion yuan respectively compared to the start of the year, while growth in wealth management products had fallen to 4.7%, for a drop of 26.5 percentage points compared to the same period in 2016.
Interbank wealth management products have seen a net decline of 2.7 trillion yuan this year, while entrusted loans have seen a year-on-year reduction in growth of 896.1 billion yuan.
Zao Xijun (赵锡军) vice-head of the Fiscal and Financial Academy of Renmin University, said to Securities Daily that the Chinese authorities are intent upon bringing all forms of financial activity within the purview of regulation, and requiring that all financial companies perform filing and submit applications with the relevant departments.