Regulation of Digital Financial Services in China: Last Mover or First Mover?

Abstract

Since 1979, China has made tremendous progress in its transformation to a socialist market economy. As part of this process, China’s financial system has evolved to one characterised by a high degree of marketization. At the same time, China today faces new challenges to growth and development, particularly from the necessity of restructuring its economy to focus increasingly on innovation and away from government led investment and low wage labour. In the context of digital financial services, China has been a late mover but this has changed dramatically in the past five years, to the point today where China is one of the major centres for digital financial services and financial technology (“fintech”). Looking forward, China needs to provide an appropriate regulatory basis for the future development of digital financial services and fintech, balancing growth and innovation with financial stability. China today is exhibiting signs of a last mover advantage in this respect that may see it leaping regulatory developments elsewhere.