Former Head of Chinese Central Bank Highlights Four Key Points for Regulation of Internet Finance


Dai Xianglong (戴相龙), the former governor of the People’s Bank of China (PBOC), has outlined key focal points for the regulation of online finance in China in the wake of the shelving of Ant Group’s mammoth IPO.

Speaking at the 2021 NetEase Economists Annual Conference in Beijing on 13 December, Dai said that online finance does not change the fundamental character of finance, and China cannot allow Internet platforms to replace financial intermediaries or dodge regulation.

Dai said that in future Chinese regulation of online finance will focus upon four areas in particular:

  • Licensed operation. Engaging in online finance operations requires administrative licenses, while online micro-loan companies are required to have a certain amount of capital for operation within and outside their provinces of origin.
  • Leverage restrictions. Loans taken by online micro-loan companies from financial institutions and the total balance of financing from the packaged sale of debt assets will be restricted on the basis of net assets.
  • Inclusive management. Given the huge profits that online finance institutions reap as a result of large-volume operations, “inclusive management” of the benefits is required. “Consumers have the right to require that companies reduce fees and rates, and [regulators] impose prohibitions on explosive profits.”
  • Public supervision. In order to protect the security and privacy of individuals, relevant authorities will conduct regulation of the the gathering and storage of information by online finance platforms.

Dai’s remarks follow the scuppering of Ant Group’s plans for a record-breaking USD$34.4 billion IPO that was originally scheduled for 5 November.

Leading Chinese analysts said that the suspension was likely motivated by efforts to tighten regulation of online micro-loans in China, following the collapse of the country’s once flourishing P2P lending sector due to widespread fraud issues. 

On 2 November – the same date that authorities announced that Ant executives had been summoned for regulatory discussions – the Chinese central bank and the China Banking and Insurance Regulatory Commission (CBIRC) jointly issued the draft version of the “Online Micro-loan Operations Provisional Administrative Measures” (网络小额贷款业务管理暂行办法(征求意见稿)), which impose far tighter restrictions on online lending operations.

These restrictions include limits on cross-provincial operations, leverage levels as well as lending amounts for individual borrowers.