Deputies suggest tightened regulation on Internet finance

He Qiang, member of the CPPCC National Committee and professor of Central University of Finance and Economics, gives interview to reporter during the “two sessions”. (Photo: CNTV)

Deputies attending China’s ongoing “two sessions” advised the country to tighten her grip on Internet finance.

Chinese Premier Li Keqiang called for regulation of Internet finance, including Internet finance, accelerating the upgrading of a supervision system for modern finance, and providing complete coverage for financial risk supervision, in the government work report he delivered at Saturday’s opening meeting of the fourth session of the 12th National People's Congress.

Li Kemu, member of the Standing Committee of the Chinese People’s Political Consultative Conference (CPPCC) National Committee, noted Thursday that to promote the healthy development of Internet finance, technical supervision should be strengthened and risk prevention plans should be drafted.

The bottom line is to prevent systematic risks, stressed Li, also a former Vice President of the China Insurance Regulatory Commission. 

Gong Fuwen, the CPPCC delegate and Deputy Chief Procurator of Shaanxi Provincial People’s Procuratorate, agreed on the great urgency of enhancing the regulation of Internet finance. 

The central government can integrate the supervisory duties of relevant departments and appoint the central bank or China Banking Regulatory Commission as the sole supervision body of Internet finance, he suggested on Wednesday, adding that efficiency can be improved and costs lowered as a result. 

Gong also advised the authorities to raise the regulatory threshold for providing Internet financial services, and to increase market transparency. 

For P2P platforms without big data support, potential risks such as illegal fundraising, low liquidity, and illegal operations should all be cause for high alert, he pointed out. 

The central bank can grant access to the platforms in its credit system to reduce credit risk. When the time is right, an information sharing platform can be established for further categorizing different types of information for different purposes, he added.

These deputies’ viewpoints follow on the rapid emergence of China’s Internet financial industry in recent years.

Data showed that by 2015, over 2,595 P2P platforms were registered, accounting for a total of 982.3 billion Yuan (151 billion USD) in transactions. Third-party Internet payment accounted for more than 87 percent of online payment, significantly exceeding that of banks. 

But lack of legislation and supervision, as well as internal industry discipline and risk management, are also testing the future of Internet finance. In 2015 alone, more than a third of these platforms were exposed for violations or even criminal activities. 

He Qiang, member of the CPPCC National Committee and professor at the Central University of Finance and Economics, also suggested tightened regulation on the industry.

He submitted a proposal on supervision of P2P platforms based on their classification. Many so-called P2P platforms raised funds illegally under the guise of providing Internet financial services, he explained, adding that the prospective founders of P2P platforms should go through some sort of approval process.