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China’s Fintech Innovation Boosts Economy

China highlighted the importance of fintech innovation to serving the high-quality development of the real economy through more convenient and inclusive financing. Due to tailor-made applications developed by banks, small and micro enterprises are able to obtain financing more easily, unlike in the past when it took up to a month for banks to conduct credit reviews. This is a typical practice of inclusive financing that could better serve the real economy.

The financial sector should meet the more diversified financial demands of the people and the real economy through technological innovation and digital transformation. Fintech innovation plays a fundamental role in promoting the development of the real economy through financial services. Fintech can push forward the digital development of the industrial economy, accelerate the transfer of offline businesses to online businesses, improve efficiency and reduce enterprise management and operation costs.

China’s central bank has been actively innovating and using structural monetary policy tools to improve the quality and efficiency of inclusive financing in an all-around way to better serve the development of the real economy. The manufacturing industry has been the main body of China’s real economy, making fintech innovation in the sector more than necessary.

Financial institutions must serve the manufacturing industry, which will also help them seize market opportunities. Considering the new situation of the high-quality development of China’s real economy, finance can only be more innovative when it is actively integrated into the real economy.

Moreover, China plans to build pioneering fintech hubs nationwide, focusing on the research and development of blockchain technology and digital currency to boost investment in financial infrastructure. Beijing ranks top among eight cities around the world, thanks to its huge consumer market, advanced technology application and fast development of the fintech ecosystem. Other cities that China aims to develop as global fintech hubs are Shanghai, Shenzhen in Guangdong province, and Hangzhou in Zhejiang province.

The People’s Bank of China (PBOC), China’s central bank, published a three-year fintech development plan. So far, some results have been achieved and major projects are proceeding as scheduled. Issuing the central bank digital currency was included in that blueprint, which also involves developing fintech services based on blockchain, big data, Artificial Intelligence (AI) and financial security technology. The three-year plan aims to promote China’s fintech industry to an international leading level.

The basic technology framework of the digital currency designed by the central bank has almost been completed, with sophisticated top-level design, and trials are ongoing in some application scenarios. The fast progress will give the PBOC a leading position among its global peers in officially launching a digital currency. Regulations on fintech technology development will focus on protecting personal privacy, expanding fintech services to benefit more individuals, and streamlining regulations.

As reported by OpenGov Asia, China has made continuous efforts on improving the financial regulatory system in the face of new challenges posed by financial technology. The Governor of the People’s Bank of China (PBOC) urged disconnecting improper links between financial information and business information to prevent monopoly in the closed-loop of data, network and financial activities.

In recent years, China has seen continuous innovation in fintech, lowering costs and enhancing the efficiency of financial services in the country. For instance, supported by large technology firms, the penetration rate of China’s mobile payment services has reached 86%. Moreover, the digitalisation of credit services helps to better meet the financing needs of small and micro-companies.

In the next stage, China will continue strengthening the supervision of payments. Measures should be taken, including advancing the regulation of financial holding companies, as well as exploring more convenient data transactions and more reasonable data use, on the basis of ensuring privacy and data security.

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