Wu Cong: Regulating Internet Finance with Industrial Self-Discipline

In the two meetings (the National People’s Congress and the Chinese People’s Political Consultative Conference) this year, “regulated development of Internet finance” was included as one of the priorities of 2016 in the Report on the Work of the Government. With respect to the booming Internet finance, regulated development is considered the key to the future of the industry.

Having a clear understanding of the development stage of Internet finance is the logic precondition of regulated development of Internet finance. In general, Internet finance will undergo three stages: firstly, the stage of “wild growth” from the bottom up driven by the market; secondly, the stage of “regulated development” under strengthened management, perfected system and strict control over the scale by the government; thirdly, the stage of “stable growth” through dynamic optimization of the role of the government and market.

At present, China is witnessing too swift and violent development of Internet finance, which shows obvious characteristics of “wild growth”. To transit from “wild growth” to “regulated development” and even “stable growth”, synergy among government regulation, industrial self-discipline and enterprise innovation should be achieved, where self-discipline of the Internet finance industry should play a key role.

If government regulation is considered as the fundamental guarantee and the most direct means of healthy development of the Internet finance and enterprise innovation the main impetus for the development of Internet finance, then industry associations are the bridge and tie linking the government, market and enterprises up, and the key link to realize industrial self-discipline, regulate industrial behaviors, provide industrial services and safeguard fair competition. Building the new governance framework and pattern of “governmental regulation externally, internal guidance of the industry and transformation and innovation of enterprises” for Internet finance, and forming combined impetus for regulated development cannot be separated from active self-discipline of the key link.

National Internet Finance Association of China led by People’s Bank of China will be founded in the near future. As the first national management association in the industry of Internet finance, its foundation has milestone significance and can guide and support institutions engaged in Internet finance to perfect management and operate by law, and prevent systematic risks.

At present, quite a few Internet finance platforms seek monopoly through subsidy war and price war, but these problems cannot be interpreted under the framework of current company law and anti-monopoly law. For another example, financial institutions have utterly different attitudes towards how to define “micropayments”. Only when such problems are clearly identified can parties involved be guaranteed to carry out fair, orderly and benign competition under unified rules and healthy development of the Internet finance industry be facilitated.

Additionally, information disclosure and consumer protection should also be enhanced as they are the engine for development of the industry. Industry associations should introduce regulations and norms on information disclosure as early as possible, adhere to authenticity, completeness, accuracy and dynamic of information disclosure, and create a clean and transparent good market environment for development of Internet finance.

Regulated development of Internet finance means “spring” will come to healthy Internet finance enterprises. Only if survival of the fittest is implemented in the industry as a whole can benign development of China’s financial system be accelerated to provide flexible and steady services for real economy.

Source: http://paper.people.com.cn/rmrb/html/2016-03/15/nw.D110000renmrb_20160315_5-05.htm