Chinese Central Bank’s Tech Chief Aims for Steady, Long-term Fintech Development, Stronger Regulation

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The head of the Chinese central bank’s tech department wants to strengthen regulation and planning for China’s fintech sector in order to abet its long-term development.

In an opinion piece published by the Tsinghua Financial Review Li Wei (李伟), head of the People’s Bank of China’s (PBOC) tech department, writes that “fintech has become the core driver of financial innovation and growth, and a key, indispensable component of finance.”

Li said that the Chinese central bank plans to research and unveil new fintech development plans, with key areas of focus to include:

  • Strengthening research into “breakthrough points” and firming up the theoretical foundations of fintech.
  • Making use of applications trials to explore implementation paths. At the end of 2018 PBOC took the lead in the launch of fintech application trials across a total of 10 provinces and municipalities including Beijing, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Guangdong, Chongqing, Sichuan and Shaanxi. Li writes that the application trials will help to foster “industrial and regional applications plans and implementation strategies.”
  • Linking theory to practice, and formulating fintech development plans. Li said that PBOC would clarify development targets, key themes and main missions for the fintech sector, as well as create infrastructure that suits the development needs of fintech, expedite data integration between finance and other sectors, and establish a sound fintech regulatory framework.

With regard to the establishment of a fintech regulatory system in China, Li said that four key areas emphasis would include:

  1. Strengthening regulation of innovative fintech products, the use of development “sandboxes,” as well as achieving greater information transparency for products via “soft methods” such as public announcements, industry filing, and user notifications.
  2. Standardisation of the establishment of new financial services channels, with a focus on user apps and application program interfaces (API), as well as safety requirements with respect to user identification, cryptographic algorithms and data protection. PBOC will formulate API security regulations for commercial banks, and requirements for financial services which are delivered externally via API.
  3. Strengthening security protection for personal financial information. PBOC plans to formulate personal financial information protection regulations, and clarify requirements concerning financial information collection, transmission, storage, usage and lifecycle destruction and sealing. PBOC will also arrange for special investigations into financial information security, including on-site inspections and sample monitoring, in order to drive commercial banks, non-bank payments providers and settlements organisations to strengthen their own systems.
  4. Strengthening of the regulation of key applications of information technology. This will include the formulation of regulations on the financial applications of cloud computing; the formulation of guidance on the financial applications of machine learning, the formulation of regulations on the financial applications of the blockchain and the formulation of standards for smart risk control systems based on the use of big data.

Li Wei highlighted the use of heightened regtech applications to improve financial risk control capability, including:

  • Establishing big data analysis and verification platforms, strengthening payments processing end terminal security regulation;
  • Exploring the application of distributed frameworks, achieving high-efficiency regulation of online payments;
  • Strengthening real-time monitoring of bills transactions via distributed ledger technology;
  • Establishing mobile finance risk control platforms, increasing risk monitoring and prevention capability.

Li Wei finally pointed to the ability of fintech to improve the efficiency of financial services, specifically highlighting:

  1. The use of artificial intelligence to improve the ability of finance to service the real economy;
  2. The application of biometric technology to improve financial inclusion;
  3. The use of payment tokenization to drive barcode payments integration;
  4. The use of API to strengthen the penetration of financial services;
  5. The use of trusted execution environment (TEE) technology to optimise the financial services processing environment.

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