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China Warns Fintech Revolution Potentially At Risk Without Rules

China Warns Fintech Revolution Potentially At Risk Without Rules

The president of a major financial investment platform has suggested that the sheer numbers of fintech companies setting up in China represents a risk to the country’s development as a major hub because of lack of controls.

Vince Zhang, President of Phoenix Finance, was speaking on Day 3 of CNBC’s East Tech West on 29 November 2018 in Guangzhou. He suggested that many of the country’s fintech firms could be unsound due to lack of strict operating checks and balances, making them unsuitable in the long term for consumers. It is estimated that there are now tens of thousands of such companies operating in mainland China.

Zhang went on to say that this factor means that China’s fintech revolution is potentially at “a very big risk” due to this lack of competent management. He stated:

“A lot of companies are not [there] in terms of their business plan, in terms of their risk management process, in terms of their overall management… A lot of these corporate control mechanisms are not in place.”

Zang maintains that China’s so named “fintech revolution” has caused the numbers of fintech firms to swell over the past two years in a surge to attract unbanked consumers. He said that although other sectors may survive, he sees the financial sector in danger of coming under increased pressure: “For anything related to financial services, [it] is pretty dangerous.”

Phoenix Finance’s president suggests that better regulation is key to solving this potential problem and feels that the issue will get the attention from government regulators next year as the risks to China’s fintech developmental plans for the future become more evident. He argued that regulation will reduce the number of companies currently operating financial services:

“Without proper risk control mechanism personnel, without proper ways of communicating with regulation, it’s potentially becoming a very big risk going forward… I would predict in 2019 it’s becoming more regulated… There will be less and less players in this field.”

The Cyberspace Administration of China (CAC), the central government’s internet censor, is drafting a policy framework which, once formulated will be used for regulating blockchain projects in the country.

The new regulation, when established, will apply specifically to both individual and institutional providers of blockchain services, whether by laptop or mobile, referring to providers as “entities or nodes”.

 

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