China Regulators Target ‘Fly-By-Night’ FinTechs

The online tech and finance sector in China has grown by leaps and bounds, but that means that “fly-by-night” and other dubious payments firms and activities must be more closely monitored.

Financial Times reported on Thursday (April 21) that a number of agencies in the country, led by the People’s Bank of China, have gathered together and approved a framework for addressing the less stable (and possibly less ethical) corners of the technology-driven financial realm.

The consortium has a one-year time horizon through which FT said efforts would be fostered to “crack down” on fraudulent activity across a number of payment types, such as peer-to-peer lending and crowdfunding. Elsewhere, FT noted that, within the Chinese financial institutional landscape, wealth management firms are not allowed to sell financial vehicles that would be akin to hedge funds (which also do short-selling) to retail investors. More immediately, the Chinese plan states that regulation is still evolving, but according to FT, smaller rivals find it tough sledding as the ability to compete against Ant Financial dwindles.

FT noted that some analysts feel competition is hobbled by a social media presence. The proposals, according to the publication, make it easier for firms to track activity. Beyond the somewhat early days for the initiative, the Chinese bank said that maturity mismatch will be scrutinized and that some funds have been tying into “fund pools.”

Those fund pools are also giving rise to some speculation that such activity may fund a number of projects that exaggerate or falsify results and then disappear.