Chinese financial regulators, including the central bank, and the Zhejiang provincial government are encouraging “controllable risks” in the country’s e-commerce hub to spur financial technology innovation, according to a government notice.
“The technological innovation capability of financial services should be improved,” the People’s Bank of China (PBOC) said in a draft plan released on Friday. “Under the premise of controllable risks and voluntariness, banks are encouraged to deepen cooperation with external investment institutions and actively explore diversified financial service models for scientific and technological innovation.”
The draft comes eight months after Zhejiang, home to e-commerce giant Alibaba Group Holding and its fintech affiliate Ant Group, began work on a “common prosperity” pilot zone to address President Xi Jinping’s goal of greater wealth distribution. Alibaba owns the South China Morning Post.
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The remarks expressing a greater appetite for risk are seemingly a departure from the more hardline stance regulators have taken against Big Tech firms since November 2020, when Ant’s highly anticipated US$35 billion initial public offering was scuttled days before the listing.
The next month, the central government vowed to tame the “irrational expansion of capital”. Throughout 2021, China’s tech industry was hit with sweeping crackdowns targeting monopolistic practices in e-commerce, off-campus tutoring, video games, data and cybersecurity practices and cryptocurrency mining.
Fintech has continued to be a particular target of interest for regulators this year, amid fears of tech companies’ impact on financial stability.
“Chinese fintech groups have, in some cases, grown so big that their collaborations with banks are increasing contagion risks in China’s financial system,” Grace Wu, an analyst at Fitch Ratings, previously told the Post after Ant Group’s cancelled IPO, adding that she expected to see tighter regulations in the future.
Since then, the world’s largest fintech market has been forced to undergo some soul searching on the role of financial innovation in China and its impact on financial security. Despite the crackdown and heightened scrutiny, however, mobile payments have continued to grow in China. The industry, dominated by Tencent Holdings’ WeChat Pay and Ant Group’s Alipay, saw 126 trillion yuan (US$19.9 trillion) in transactions in the third quarter of 2021, according to the PBOC.
Even as the government refocuses its efforts to address economic growth, with Vice-Premiere Liu He recently saying the government would “actively release policies favourable to markets”, the language in the new fintech notice is decidedly cautious.
The document’s guiding principles clearly state that “financial opening-up and innovation need to be driven steadily under the premise of effective regulation and controllable risks”.
It is only under these principles that banks are encouraged to “fully utilise the synergy with their subsidiaries to provide continuous financial support for science and technology enterprises”, the notice said. Additionally, the draft supports innovation in intellectual property insurance and better coverage of technology-related insurance.
The government is also looking to support the industry with two new bureaus for tech innovation and social responsibility, the State-owned Assets Supervision and Administration Commission of the State Council announced on Wednesday. The new government bodies will help “centralise mindsets … when driving innovation”, the announcement said.
The measures implemented in Zhejiang’s pilot project are expected to be rolled out across the country once proven effective, according to government officials.
“Examples are expected to be set up for other regions to roll out step by step so that common prosperity for all people can be achieved gradually,” an official of National Development and Reform Commission said last year in a press briefing.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2022. South China Morning Post Publishers Ltd. All rights reserved.
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