Yuan Shanxiang, deputy director of the Foreign Trade International Finance Research Centre of the Chinese Academy of Social Sciences and the secretary general of the Chinese Internet Finance Honesty League, commented:
“Internet Finance brought in China has achieved rapid development through constant improvement and innovation. The future global Internet finance rules will be made by China and China will definitely lead the trend of world Internet Finance.”
The Internet finance industry is developing at a rapid pace in China. By the end of 2014 about 1,400 platforms had raised $18 billion and about 390,000 people were employed in the P2P sector.
"Chinese Internet finance has experienced its primary development stage in China and has vital practical significance in current economic development and social transition. Chinese Internet finance is also in accordance with the developing direction of 'improving inclusive finance' put forward at the 18th CPC National Congress and the 3rd Plenary Session of the 18th Central Committee of the Communist Party of China. However, a perfect credit system and self-discipline mechanism should be built. Only by taking honesty as its basis can Chinese Internet finance truly and effectively facilitate Chinese economic development."
As Yuan explained honesty is incredibly important in peer-to-peer lending. For the industry to flourish investors need to trust the platforms with their investments. The problem of fraud within the Chinese industry has been well reported and this is something that could be helped by better regulations. It was announced this week at The Chinese People’s Political Consultative Conference that the People’s Bank of China would play a central role in creating guidelines and regulations for new forms of finance. The existing regulation does not cater for the new financial products and so updates need to be made.
He Qiang, a professor with the Central University of Finance and Economics, said in his proposals to China's top advisory body this year:
“The ongoing financial reform must move toward strengthening market regulations to unlock the full potential.”
He, who is also a member of the CPPCC National Committee, added:
"The government should make a scientific risk assessment system for Internet finance based on quantitative indicators, rather than calling off financial products and services simply because they may cause relatively high financial risks."
Most companies will embrace dedicated regulation of the industry as it makes it clearer what the dos and don’ts are. But it’s equally important that the regulation leaves room for the development of this fast-changing industry and different products that may emerge in the future.