April 2019 to March 2020

Koichiro Ohira(Chief Fellow, Institute for International Socio-Economic Studies)

In this research, we have surveyed Internet use, data collection, utilization of financial data and new financial services in China. Major aspects of the study are described below.

There are almost 900 million Internet users in China, and Internet use is increasingly expanding from communication and collecting information, to include daily activities such as shopping, meals, transportation and tourism.

FinTech in China has passed the stage of digitization of the back end and using the Internet for the front end, and is now in a phase of fully digitizing and automating financial services. In the area of settlements, mobile payment using smartphones is now becoming common. In lending, regulation has had a significant effect reducing P2P lending, which had expanded rapidly earlier, but supply-chain financing and risk management for lending to individuals is attracting attention.

Means of acquiring data for finance and FinTech include (1) public open data, (2) purchasing data from communication providers and data handling businesses, and (3) obtaining data by collaborating with various other enterprises. Types of data vary widely, and it is not yet clear what sorts of data will yield value, so how trade in data develops in the future is also attracting attention. 

In financing, data and the results of data analysis are used to prevent fraud and to determine the reliability of borrowers. There are FinTech enterprises specializing in data collection and analysis.

China is an advanced country in terms of credit scores. Zhima Credit, a private credit score initiative, is already popular, and there is activity suggesting national initiatives to integrate systems and centralize information, such as the launch of Baihang Credit. Uses will also go beyond support for financial decisions, and it may include restricting behavior in the Social Credit system.

Use of biometric authentication has also begun in the financial field. Face recognition settlement systems in particular are being introduced, and Alibaba and Tencent are competing vigorously in this area.

The Chinese government has approved participation in finance by different types of business, and exhibited an attitude of tolerance for provision of various services. Currently, such a free and laissez-fair posture is rare, and both service providers and the volume of trade have declined significantly due to strengthened regulations, as seen particularly in P2P lending. Government involvement in services popularized by private initiative, such as credit scores, also seems to be increasing. As such, even as supervision is becoming stricter, there is increasing attention on what sort of environment will be needed to encourage innovation and enable production of new services.