Nothing is easy in the banking industry, and it's getting tougher in China. The Chinese central bank (PBOC) used to control banks’ lending and deposit interest rate by setting high and low limits, as the top line and bottom line in the chart. If a bank in China can always lend/borrow at the limit rates, the margin would not change much over the years. However, the story is not that simple.
Over the past year, China's Consumer Finance industry has been attracting a significant amount of attention. It may be the next hot spot for financial development in China.
China’s consumer finance industry is booming amid the rising level of consumption among the Chinese Millennials group, a population representing nearly one-third of China’s whole population. The scale of the industry has been pushed to RMB 107.72 billion by total asset value by September last year, almost doubling the scale of RMB 51 billion in 2015.
December 6th, 2016 China Merchants Bank (CMB) held its press conference in Shen’Zhen, China, for its new AI wealth management product: MachineGene Investment, or “Mo’Jie” in Chinese. The launch represented the first time a Chinese bank released a wealth management product based on AI/Robot technology.
Recent announcements in the personal credit scoring market in China show that both global established giants and smaller, but cutting-edge companies are carving out niche markets for themselves in the country.
Since December 1st, China’s Central Bank, the People’s Bank of China (PBOC), has implemented a new Classification Management Rule for Personal Bank Accounts in China. It divides individuals’ bank accounts into three categories: 1. the main account, 2. the wallet for everyday use and 3. the 'coin purse'.
KPMG and H2 Ventures, an Australian Fintech ventural capital company, have issued their report on the 2016 Top 100 Global Fintech Companies. Amongst many of the key findings in the report, it is clear that China Fintech is in the lead.
Last week, the People’s Bank of China (PBOC), China Banking Regulatory Commission (CBRC), China Securities Regulatory Commission (CSRC) and China Insurance Regulatory Commission (CIRC), who are collectively known in China as the “Yi Hang San Hui” (one central bank, three commissions), have issued four major implementation plans around Internet finance. The plans are aimed at reducing risk and further issues in the internet finance industry. Although the regulations will mean tighter controls around internet finance and fintech development in China, it should result in a more healthy environment for the industry in the future.
On October 14, HNA Usolv, a cross-border trade solutions provider under the brand of HNA Group, signed a cooperation agreement with CRIF, one of the leading European credit information companies.
On September 28th, the Postal Savings Bank of China (PSBC) (1658.HK) finally made its IPO debut in Hong Kong after a lot of speculation.
The Bank of Harbin was granted a license to set up its consumer finance company, Hayin, on September 19th. The bank owns 59% shares of Hayin’s equity with paid-in capital RMB295 million ($44 million). It is another consumer finance license which is issued by the China Banking Regulatory Commission (CBRC) to a company that has a banking background.
China's internet finance, or fintech, sector has had a busy couple of years as the industry has developed to be a critical part of the financial industry as a whole. Yet, the developments have been somewhat imbalanced. While areas like digital payments and asset management grew and matured, others like credit scoring fell behind. On September 9th, China's National Internet Finance Association (NIFA) finally launched their digital Credit Information Sharing platform, which really brings credit scoring into the fintech fold in China.
Over the past few months Alibaba's 'Finance Cloud' has gained significant traction with an estimated 40+ banks subscribing to some, if not all, of the services available on the financial platform. Far from just a cloud platform, Ali Finance Cloud is the closest we have seen to 'Bank in the Cloud.'
In July, China released the second draft of its Cyber Security Law, just a year after the release of the first draft. On one hand, many of the key terms listed will have to be better defined before it is possible to draw definite conclusions about the implications of the Law. On the other, it is already clear that the Law makes it harder for foreign technology companies to conduct business in China, and this will likely be the case for financial institutions too. Specifically, the second draft does that by expanding and blurring the scope of the regulation, giving authorities broader access to information systems and raising data localization requirements.