Business
Upgraded Supervision Facilitates Financial Technology
China's financial authority is strengthening the supervision of financial technologies
  ·  2018-12-17  ·   Source: NO. 51 DECEMBER 20, 2018
A customer pays her bill using a facial recognition technology-powered cash register at a supermarket in Handan, Hebei Province, on June 22 (XINHUA)

Some senior members of China's financial supervision authority recently sent signals of an upgrading in the supervision of financial technology (fintech). Major economies in the world tend to have similar attitudes toward the regulation of fintech as it develops rapidly. In China, strong supervision has become a keyword; in the European Union, information security in the fintech field has attracted more attention; and in the United States, supervision of virtual currency is becoming increasingly strict.

Fintech is bringing challenges to the financial sector. On the one hand, the application of information technology further connects different business forms inside the financial sector as well as finance with other industries, which also facilitates risk infections. On the other hand, with the application of information technology, risks already existing in systems, technologies and platforms are spreading to the financial sector and even sectors that are not yet covered by supervision.

In the face of risks and challenges brought about by fintech, we should not be put off by the fear of risks because the economy will be vigorous only when finance is vigorous enough and the economy will be stable only when finance is stable enough. Hence this requires a balance between fintech innovation and financial safety.

Financial safety doesn't mean low-level safety that denies innovation, but rather high-level safety based on the achievements of fintech innovation. Through the application of cutting-edge technologies such as big data, cloud computing, the Internet of Things, biometric authentication and artificial intelligence, fintech innovation enriches the methods of safety protection and advances the development of the financial market through the innovation of financial products, promoting the reorganization and integration of financial resources. These will lay a solid foundation for maintaining financial safety.

However, fintech innovation should never be achieved at the cost of ignoring financial safety. It must be high-quality innovation aimed at ensuring financial safety. Only when a supervising mechanism that aims to ensure financial safety and covers the whole process of financial activities is established to alleviate damages of financial crises on the economy can fintech innovation advance steadily.

China has gained much valuable experience in regulating fintech innovation, and in the future the country needs to further improve its administration of fintech.

Through legislation, the top-down design of financial safety will be further strengthened, and the gap in laws in the new finance and pseudo-banking fields will be filled. In addition, to complement high-quality legislation, more enforceable industrial standards will be established so that financial institutions and supervision will have rules to abide by.

Regarding institutional improvement, besides the adjustments to the current structure that includes the Financial Stability and Development Committee of the State Council, the People's Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission and local financial supervising bureaus, judicial institutional reform has begun, with the Shanghai Financial Court, the Beijing Internet Court and the Hangzhou Internet Court established. This means that in addition to administrative measures, judicial resources will be increasingly used in financial supervision.

In the realm of social public governance, the protection of personal, property and information safety of financial consumers will be further stressed, which is part of prudential and behavior supervision. Moreover, there is the role of self-regulatory organizations in coordinated supervision. Compared to supervising authorities, self-regulatory organizations are closer to the market and have more resources, so they can contribute to the coordinated development of fintech innovation and financial safety.

This is an edited excerpt of an article written by financial commentator Che Ning and was first published in Economic Information Daily

Copyedited by Rebeca Toledo

Comments to dengyaqing@bjreview.com

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