The Phnom Penh Post

China’s emerging tech firms set to face tighter scrutiny

- Chen Jia

CHINESE regulators are expected to adopt a tough stance on emerging technology in the financial sector and extend supervisio­n of technology giants in an effort to curb systemic risks, central bank officials said on Tuesday.

Over-innovated financial products with lagging regulation may lead to financial instabilit­y and potential losses for investors, said the People’s Bank of China (PBoC), the central bank.

China will tighten regulation­s on all types of institutio­ns doing financial businesses so as to protect investors who are unable to recognise potential risks, PBoC vice-governor Pan Gongsheng said in a speech that was read out at the Third China Internet Finance Forum in Beijing.

“Financial activities for the public, whether in the name of technology or not, should be strictly regulated, and we should safeguard residents’ money,” he said in his speech.

Proper use of financial technology can help reduce financing difficulti­es for small and micro enterprise­s, but activities, which lead to funds circulatin­g within the financial system to boost speculativ­e investment should be controlled, said Pan.

The annual Central Economic Work Conference, which was held last week, highlighte­d prevention and control of financial risks as one of the “three tough battles” and a key task that needs to be carried out next year.

The PBoC establishe­d a special work group in 2016 to tackle risks rising in internet financing businesses. In 2017, the government banned socalled “initial coin offerings” or ICOs, a way for start-ups to raise funds by selling off newly-created digital currencies. All trading platforms for such virtual assets have been closed in the country.

“We have avoided the risk of a massive virtual asset bubble,” said Pan. The regulators will build an online financial risk supervisio­n mechanism to improve the disposal of crossmarke­t risks by taking advantage of new technology, he said.

Financial regulators around the world are working on a set of global regulatory standards, and countries standing at the leading edge of financial technology will have more advantages to dominate the rules. Thus China, as one of the global fintech pioneers, should proactivel­y participat­e in the internatio­nal rulemaking process, said experts.

The developmen­t of financial technology is more like a competitio­n among countries. For instance, the PBoC is still in the process of developing its own digital currency, in a race with some other countries. This competitio­n of government-backed cryptocurr­ency can be seen as a key feature of the “digital era”, PBoC research bureau head Wang Xin said on Tuesday.

A recent report from USbased CNBC said that China’s support for financial technology, represente­d by blockchain, “could put other countries behind, to the point where the world’s secondlarg­est economy could dominate the technology and the way it’s developed”.

But it is not easy for the private sector to win the digital fiat money making competitio­n. “The right to issue money is important for the government, as it is one of the fundamenta­l measures for the government to raise funds and implement macroecono­mic adjustment­s,” said Wang.

In a financial crisis, the central bank can inject liquidity and stabilise the financial system through flexible adjustment­s such as money supply, a function that privately-issued money, such as Facebook’s Libra, may find it hard to implement, he said.

Some large financial technology companies, which have a broad business scale involving a large group of investors, should be regulated as systemical­ly important financial institutio­ns, said Xiao Gang, former chairman of the China Securities Regulatory Commission.

Higher reg ulator y standards for capita l adequacy rat io, asset liabi lit y rat io and informatio­n disclosure should be introduced to these large companies, including the financial holding groups, according to Xiao. “New regulator y standards are needed, not just copying t he super v ision system for traditiona l banks.”

 ?? ZOU HONG/CHINA DAILY ?? A customer pays using a facial recognitio­n device at a supermarke­t in Beijing.
ZOU HONG/CHINA DAILY A customer pays using a facial recognitio­n device at a supermarke­t in Beijing.

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