China’s Fintech Development for 2022-2025

China’s Fintech Development

The People’s Bank of China (PBOC) recently released its Fintech Development Plan for 2022-2025, which seeks to further develop China’s fintech sector and drive the digital transformation of finance in the country over the next four years.

This is the second fintech development plan releas by the PBOC—the first one. The Fintech Development Plan for 2019-2021. Was releas in 2019. While the first fintech development plan set to build “pillars and beams” for the fintech sector. The new plan emphasizes “building momentum” on the basis of “accumulation” to leapfrog the sector’s progress by 2025.

The new fintech development plan is based on China’s 14th Five Year Plan, a roadmap for China’s social and economic development in the period between 2021 and 2025. In this article, we provide an overview of the development of fintech in China, outline the country’s strategies and main tasks for the fintech sector in 2022-2025, and take a closer look at the key points of the new fintech development plan.

What is fintech?

Fintech. Or financial technology. Is a combination of the terms. “Finance” and “technology”. While originally referring to computer technologies that were appli to the back office of banks and other financial institutions. Fintech has grown into a catch-all term to describe any business that uses technology to enhance or automate financial services and processes.

Fintech now includes a variety of technology-enabled financial activities, such as mobile payments, digital banking, online insurance, fundraising, and investment management without the assistance of a person. Moreover, fintech also includes the development and use of cryptocurrency, although this aspect of fintech is subject to increasing scrutiny in many countries.

What is the fintech landscape in China?

In China. The development of fintech can be divid into three stages:

Finance computerizing stage (1993—2004): The People’s Bank of China and other banking financial institutions began to digitalize their back offices and services. Typical applications include ATM, POS, bank’s core transaction system, credit system, clearing system, etc.
Internet finance stage (2004—2016): Financial institutions or Internet companies started to build online platforms, gather massive users, and use mobile internet technology to transform traditional financial services. The asset end, transaction end, payment end, and capital end of finance are connected by technology into the same network. During this stage, some fintech businesses such as online securities account opening, online banking system, P2P lending, and mobile payment were expanded rapidly.

Fintech stage (2016—present):

Unlike the Internet finance stage, fintech is broader in scope. In addition to the Internet technology, more emerging technologies, such as big data, cloud computing, artificial intelligence, and block chain, are merged into the field of financial business to change or create new financial products or services, lower transaction costs, and improve operational efficiency. Representative applications include big data credit investigation, intelligent investment, and supply chain finance, etc.

Due to the country’s narrow coverage of traditional financial services (insufficient supply of inclusive finance, especially in rural areas) and the advanced development of Internet infrastructure, China has much to gain from the development of the fintech sector. With the support of unparalleled scale of data usage, the once lagging Chinese fintech sector has caught up quickly to global progress.

China is now the world’s leading fintech investor since 2018. In 2018, China’s fintech investment reached US$25.5 billion, a 900 percent growth year-on-year, accounting for over 50 percent of the global total. According to CCID Consulting, in 2019, China’s fintech sector had a market value of RMB 375.3 billion (US$59.2 billion); its fintech market size is projected to reach RMB 543.4 billion (US$85.7 billion) by 2022.

Today, fintech is an integral part of public life in China. According to the Ernst & Young Fintech Adoption Index published in 2019, the adoption rate of consumer fintech in China reached 87 percent, meaning that 87 percent of China’s digitally active population use at least one fintech service (mobile payments, online banking, insurance, borrowing, etc.) in their daily life. The adoption rate is expected to continuously grow as fintech becomes more accessible to the rural population.

What does the Fintech Development Plan for 2022-2025 say?

Main challenges faced by China’s fintech industry

The Fintech Development Plan for 2022-2025 spells out the main challenges faced by China’s fintech industry. Despite making significant achievements, the development of China’s fintech sector is believed to be unbalanced and insufficient. Among others. The digital divide caused by the unbalanced application of intelligent technology in different regions and groups is becoming increasingly prominent (e.g., it’s not rare to see that the elder group have difficulties in applying fintech). The unbalanced intra-regional financial development still exists.

The disorderly expansion of some tech giants to the financial sector has triggered antitrust investigations. The “Matthew effect” (the phenomenon that the strong get stronger and the weak get weaker) of digital development between large and small financial institutions has been on display. And more importantly, China’s performance has paled in developing key breakthrough technologies. These challenges are key to the integration of finance and technology in the future and to promote the digitalization of the financial sector.

China’s vision for fintech by 2025

By 2025, China wants to achieve leapfrog improvement of the fintech sector. In which data’s treatment as a factor of production is fully realiz. The high-quality digital transformation of the financial sector is advanc. Fintech governance is improv. Application of key technologies are deepen. And development of digital infrastructure becomes more advanced. China wants to have a “digitaliz. intelligent. Green. And fair” fintech sector that can give strong support to the implementation of strategies. Such as innovation-driven development. Digital economy. Rural revitalization. And carbon peak and carbon neutrality.

About the Author: AKDSEO

You May Also Like