Fintech Regulation in China

Financial technology (Fintech) brings about paradigm changes to the traditional financial system, presenting both challenges and opportunities. In 2020, when my book ‘Fintech Regulation in China: Principles, Policies and Practices’ (Cambridge University Press, 2021) was largely written, unlike many traditional businesses, Fintech seemed to be accelerated rather than hampered by the outbreak of the COVID-19 pandemic. Due to the various restrictions and even lockdowns imposed during the pandemic, more people and institutions have embraced Fintech, doing shopping, payment, and investment through online platforms. In any event, Fintech looks set to reshape the financial landscape, producing significant impact on the business community and society at large.

This is the first book-length treatment of the regulation of Fintech in China. At the international level, there has been a fierce competition for the coveted title of global Fintech hub. One of the key enablers of success in this race is regulation. As the world’s leader in Fintech, China’s regulatory experience is of both academic and practical significance. This book aims to present a systematic and contextualized account of China’s Fintech regulation, identify relevant institutional factors contributing to the development of the Chinese law, and illustrate why and how China’s Fintech regulation has been developed, if and how it differs from the rest of the world, and what can be learned from the Chinese experience.

Fintech is an evolving concept with new products or services emerging constantly. Hence, it would have been neither desirable nor feasible to discuss all Fintech sectors in the book. The book focuses on online P2P lending, cryptoassets, initial coin offerings, mobile payments, data protection, robo-advisory, equity crowdfunding and central bank digital currency. In fact, China has both stories of success (eg, mobile payments) and lessons of failure (eg, online P2P lending).

Although different sectors of the Fintech market have different features and issues, this book shows some common threads running through them. First and foremost, the regulatory goal is to achieve two main objectives, namely facilitating financial innovation and market development on the one hand, while ensuring risk control and investor protection on the other. Second, the regulatory balance is a delicate and dynamic one, which needs to be carefully designed and adjusted according to the local conditions of any given jurisdiction. Third, the regulatory regime for the Fintech markets is a work-in-progress, which is not surprising given the fast-changing pace of the underlying Fintech markets.  

Given the novel and disruptive nature of Fintech, a fundamental question here is whether we can still use the traditional regulatory framework for Fintech, or we need to think outside the box and introduce a new one, specifically for Fintech. Indeed, Fintech regulation presents a cutting-edge and largely uncharted territory, and the right key can be found only after lots of trial and error.

From a political-economic perspective, this book also ventures to explore the Chinese-specific characteristics of China’s Fintech regulation. For instance, it does not only examine the substantive rules, but also the enforcement issues, particularly the interest group politics of relevant regulators. At a higher level, China’s Fintech market can be labelled ‘policy market’ in that the development and regulation of China’s Fintech markets have been heavily influenced by the policies of the government (or even the Chinese Communist Party). The issue of data privacy and cybersecurity has become increasingly important in the regulation of China’s Fintech business, with far-reaching implications for the financial markets domestically and internationally (via overseas-listed Chinese Fintech firms). Uncertainty over these issues is heightened by China’s growing concerns over national security and the ongoing competition (confrontation) between China and the US.

In sum, the Chinese experience can have important implications for the international discourse and debate on the regulation of Fintech. This book has several features which readers may find useful as a source of information. The first is to present a systematic and contextualized account of China’s Fintech regulation, so that readers can have a holistic view of the regulatory approach and regulatory perimeter in China. Second, it tries to identify and analyze factors which have contributed to the institutional environment in which China’s regulation of Fintech has been made and enforced. This will help readers understand not only what the law is, but also why the law is the way that it is. Third, it takes a comparative approach to critically evaluating the Fintech regulation in China. The comparative analysis covers some major Fintech jurisdictions in the region and internationally, such as the US, the UK, Singapore and Hong Kong. Hence, the readers can broaden their horizons and have a deeper understanding of the strengths and weaknesses of the Chinese experience. While the book was written before China’s recent crackdown on Bigtech, readers may find it useful to making sense of the Chinese policy change.   

Robin Hui HUANG is Professor in the Faculty of Law, Chinese University of Hong Kong.