Banking sector financial institutions have emerged as the main force behind projects included in the fintech regulatory “sandboxes” launched by multiple cities around China over the past year-long period.
The People’s Bank of China (PBOC) announced the launch of China’s first fintech sandbox trial in Beijing in early January 2020, after initially approving the scheme in December 2019.
Nine Chinese cities have obtained approval to conduct fintech sandbox trials, including Beijing, Shanghai, Chongqing, Shenzhen, Xiong’an New District, Hangzhou, Suzhou, Guangzhou and Chengdu. As of January 2021 these sandboxes are collectively host to a total of 80 innovation application projects.
Banks are participants in 73 of these 80 projects, accounting for a 91% share and attesting to the pivotal role of the banking sector in the development of Chinese fintech, following efforts by regulators to curb the “financialization” of established tech platforms.
The big six state-owned banks are highly active in China’s fintech sandboxes, taking part in 28 of the 80 innovation projects.
Joint-stock banks are also active players, with nine participating in sandbox innovation projects, while municipal commercial banks are even more prominent a presence with 12 such lenders taking part.
A report released by the Zhongguancun Internet Finance Institute in March 2020 highlighted efforts by Chinese authorities to “de-financialize” the tech giants and curb their efforts to directly engage in financial activity. The report also forecast that China would step up the regulatory and developmental role of the fintech sandboxes.
Domestic analysts expect the fintech sandbox trials to continue to see robust expansion in 2021, as the Chinese government drives growth in the sector while simultaneously imposing strict regulatory curbs to contain any risk issues.