With P2P lending platforms and other new fintech players emerging in the market, Chinese regulators have taken steps to limit their impact, in sharp contrast to Western authorities. On July 18th, the People’s Bank of China (the country’s Central Bank) released new regulatory guidelines that state client funds must be held at recognized banks, that payments be channeled through traditional systems and increased disclosure requirements for P2P lending platforms.
One supporter of the new regulations is Yang Kaisheng, CEO of the Industrial and Commercial Bank of China. Speaking at a conference through a translator in Australia, Yang said,
“Technology doesn’t change the financial risk of activities. There is a perception that when banks develop internet technology, it’s not regarded as ‘fintech’. Some people say this is a new idea, a new ideology that will get rid of agents and intermediaries and that banks can’t adapt.”
Yang would continue to argue that the new regulatory framework would ensure fintech growth by creating greater stability in the market. However critics would be quick to add that the new regulations keep established players at the top of the market. With the Chinese Stock Market rapidly falling and economic slowdown more and more apparent, there is an understandable desire by Chinese to create some stability domestically. However the new regulations could easily prevent further innovation in the market creating only a short term fix.
Overview by Tristan Hugo-Webb, Associate director, Global Payments Advisory Service at Mercator Advisory Group
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