FinTech in China: From Shadow Banking to P2P Lending
In 1978 China Financial sector has began a gradual reform process. Within 40 years the country went from a mono-bank model to one composed of hundreds of wholly-owned State banks and joint stock commercial banks. Yet this diversification has the banking landscape has not resolves credit allocation inefficiency. Indeed, whilst SME represent 80 % of the economic output of the country, it is only receiving 20 % of the credit originated by banks. This has spurred the development of shadow banking, an informal and unregulated network of lenders and borrowers. The emergence of Financial Technology has allowed for this activity digitized itself in the form of Peer-to-peer lending channel. The combination of and unregulated market and large credit gap has lead to the emergence of a sector that had only one platform in 2007 and over 2000 in 2015. Therefore the author submit that the emergence of the P2P sector in China is neither new, nor unexpected. Ultimately, this systemic shift caused by the P2P sector offers China a regulatory and market reform opportunity as the shadow has been brought to the light.
KeywordsFinancial technology FinTech Financial innovation Financial globalization Financial regulation China Regulatory Technology RegTech
The authors gratefully acknowledge the financial support of the Australian Research Council Linkage Grant (Regulating a Revolution: A New Regulatory Model for Digital Finance) and the Hong Kong Research Grants Council Theme-based Research Scheme (Enhancing Hong Kong’s Future as a Leading International Financial Centre).