Chinese Central Government Releases New Payments and Fintech Regulatory Plan

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The Chinese central government has reiterated its stance on the need for strong fintech regulation, as part of the release of a slew of new measures in relation to China’s tech and internet sectors.

A 22 June meeting of the Central Comprehensively Deepening Reforms Committee (CCDRC) discussed and approved the “Work Plan on Strengthening Regulation of Large-scale Payments Platform Enterprises and Expediting the Standardised and Healthy Development of the Payments and Fintech Sectors” (强化大型支付平台企业监管促进支付和金融科技规范健康发展工作方案).

The Plan calls for “driving large-scale payments and fintech platform enterprises to return to their origin,” as well as the “complete inclusion of payments and other financial activities within regulation”.

CCDRC also called for driving the fintech sector to “focus on servicing the real economy,” and ensuring that all forms of financial activity in China are licensed.

The release of the Plan follows a protracted crackdown on China’s Internet platforms which first kicked off in the second half of 2020, and saw the shelving of Ant Group’s proposed listing on the Shanghai and Hong Kong bourses.

Chinese authorities have since pushed for fintech giants to convert into financial holding companies to expedite regulatory scrutiny, as well as strengthened regulation of online finance.

Pan Helin (盘和林), an expert on the digital economy from Zhejiang University, said to state-owned media that the Chinese central government is continuing to focus its attention on large-scale payments companies, and in particular the “excessively diversified state of operations.”

“At present, some financial institutions have embedded financial products into payments tools to divert consumers, which undermines the fairness of these payments tools, and comprises a definite means of misleading finance consumers.

“In the past regulators have repeatedly stressed and pushed for large-scale Internet platforms and payments organisations to return to their origins. This last meeting has again made mention of this, which clearly indicates the determination of regulators to continue to effectively perform related work.”

Zhou Maohua (周茂华), a macro-economics researcher from Everbright Bank, said that the consistency of the latest round of regulatory pronouncements will serve to dispel uncertainty in relation to the future prospects of the fintech and online finance sectors in China, and help to “effectively stabilise market expectations.”

Zhou also points out that the ongoing focus on ensuring that all forms of financial activity in China are licensed and subject to regulatory scrutiny is part of efforts to prevent systemic financial risk.

“Financial activities must be subject to unified regulation – this is the intrinsic necessity of preventing potential systemic risk, guarding the bottomline, and expediting the standardised and healthy development of the sector,” said Zhou.

“Finance is the arterial system of the real economy, and any systemic risk in the financial system would be a severe shock to the real economy.

“Large-scale payments organisations and fintech platforms play an especially important role as key financial infrastructure for overall financial and economic activities…ensuring that this financial infrastructure operates steadily and sustainably can better support the development of the real economy.”

Other measures discussed and approved by the 22 June meeting of CCDRC included:

  • “The Opinions on Establishing a Foundational Data System to Better Employ Data as a Factor of Production” (关于构建数据基础制度更好发挥数据要素作用的意见).
  • “The Opinions on Strengthening and Improving Administrative Divisional Work” (关于加强和改进行政区划工作的意见).
  • “The Work Plan on Undertaking Tech Talent Assessment Reform Trials” (关于开展科技人才评价改革试点的工作方案).
  • “The Work Plan on Strengthening Regulation of Large-scale Payments Platform Enterprises and Expediting the Standardised and Healthy Development of the Payments and Fintech Sectors.”