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Corporate governance to bust risks in fintech

By Chen Jia| China Daily| Updated: September 6, 2021 L M S



Regulators mull fresh steps to tackle ethical problems like misuse of tech

China's financial regulators will step up efforts to improve corporate governance at financial technology, or fintech, companies and curb financial risks related to ethical issues like misuse of technology, a central bank official said on Friday.

New regulatory measures will include an ethical censorship system and information disclosure standards for fintech companies.

Ethics and morality will be key gauges to evaluate the fintech sector's performance, said Li Xingfeng, deputy head of the Technology Department of the People's Bank of China, the central bank.

Other measures include regulations on intelligent algorithms, which are used in high-tech financial services like artificial intelligence-enabled investment advisory services. Such services, experts have been warning, may lead to irrational financial investment activities and even threaten financial stability.

The PBOC published the 2021 Financial Stability Report on Friday. The report highlighted improvements to the regulations for the fintech sector.

It also indicated all peer-to-peer, or P2P, online lending institutions in China have been closed. Financial regulators have cracked down on dubious financial activities like illegal fundraising, unlawful cross-border gambling and unauthorized private banking.

Regulations on big fintech companies have been tightened, the report said.

According to official data, as of Friday, more than 90 percent of financial transactions are conducted online, and consumers can obtain financial products through noncontact services.

So, more funds and sensitive personal information are explored on the internet, which necessitates advanced regulation technology to ensure cybersecurity, Li said at the China International Fintech Forum 2021, which was held as part of the ongoing 2021 China International Fair for Trade in Services, or CIFTIS.

At the forum, the Academy of Internet Finance, which is part of Zhejiang University, released a report on new rankings for global fintech hubs, evaluated on the basis of market scale, technology development and regulatory environment.

Beijing topped the list of 50 cities across the globe, followed by New York and San Francisco in the United States.

Huang Yiping, director of the Institute of Digital Finance, which is part of Peking University, said the development of the fintech sector in China has entered the "2.0" phase. One change that can be discerned is the "savage growth" period might have ended, replaced by a period of all-round tightening regulations.

Financial institutions will reclaim a dominant role during this period, replacing technology companies, Huang said.

Fintech services, which have helped ease financing difficulties, may boost investment in the real economy in the future, and the industrial internet could be the next hot spot to follow the consumer internet, he said.

Meanwhile, China continues testing its central bank digital currency, or CBDC, called the e-CNY. More application scenarios will come into play during the Beijing 2022 Winter Olympic Games in February. As a run-up, many financial institutions are demonstrating e-CNY-related services at the CIFTIS.

Zhou Hao, a professor of the PBC School of Finance, which is part of Tsinghua University, said CBDCs could provide monetary authorities and governments a new means of economic stimulus through direct loans, which can improve the effectiveness of monetary policy.