China’s government is cracking down on fintech. What does it want?

FINANCIAL TECHNOLOGIESP2PQR “cause turmoil when loosed” yet “perish once regulated”, a deputy governor of China’s central bank observed last year. This is an apt description of the dilemma facing the country’s regulators. Innovation has swept its financial markets over the past decade. It has produced some of the world’s most valuable technology companies, such as Ant Group, and in some cases, such as peer-to-peer () lending, led to fraud and losses. Regulators have fintech in their sights. But what is it they hope to achieve?The rise of fintech in China has been unmatched elsewhere. Cash has vanished from cities, replaced by mobile and -code payments. Tech groups processed 210trn yuan ($32trn) in payments in the first nine months of 2020, twice the amount in 2016. Consumers often manage wealth products or buy insurance on their phones; borrowing to shop on virtual malls has never been easier. Tech firms helped broker trillions of yuan in micro-loans last year.