Feb 2 2016
The growing Chinese Internet finance industry has been imposed with strict regulations by the Chinese authorities in line with the alleged fraud in the industry over the recent years. The online peer to peer (P2P) industry in China has over 3800 operators, of which above 1200 such firms are allegedly involved in illicit dealings with customers. Some of these firms have been known to be whisking away with the investors money while many have closed down as per reports by Wangdaizhijia, known to be a source of industry data. The worth of the Chinese Internet finance industry is about 133.1 billion yuan ($21 billion).
Several basic guidelines were issued by the Chinese regulators to the Internet finance industry in what is known to be a 6000 word long document. The guideline specifically seeks to categorize the running models in the Internet finance industry and issuing customized regulations for the models. The industry regulators must take care of this and try to classify several models running in the industry as per the regulations by the Government. In return this will create a clearer picture for the Government and help them get a better hold of the Internet finance firms.
The industry has been categorized into six factors of operations namely Equity crowd funding, Internet loans, Internet insurance, Internet trust and consumer finance, Internet payment and Internet sale of funds. The operation guidelines have made it clear that separate regulatory institutions must be assigned to different categories which would help the authorities to have a better grip on the operations of the industry. As reports suggest, The Peoples Bank of China has been assigned to keep a tab on the mode of payments done online, while the online selling of funds, equity crowd funding will be supervised by China Securities Regulatory Commission and thus help curb illegal trade. Internet security, self regulation of industry has been taken care of in the regulations while confusion still persists about the role of participants in the Internet finance market. All these can be seen as a welcome change as the industry is known to have been involved in a network of illegal trade and negotiations.