Senior central bank officials called for the establishment of legal framework to fend off risks caused by digital financial services in order to better achieve inclusive growth nationally.
Speaking at the China Financial Forum in Hangzhou, Zhejiang province, on Saturday, Xu Zhong, head of the research bureau with People's Bank of China, said that fast development of digital finance in recent years in China helped improve financial inclusion — the delivery of financial services at affordable prices.
"Digital technologies helped resolve a number of difficulties in distanced places with no basic infrastructure hindering financial inclusion, through mobile payments, online banking and online crowdfunding services," said Xu. "For people in need of loans in distanced regions, they could easily complete a transaction as long as they have access to mobile phone services."
But regulators have yet to appropriately account for risks related to the emerging digital service industry, according to Xu, referring to credit risks, fraud, fund flight and illegal fundraising activities.
The Annual Report of Internet Finance in China released earlier this month showed that by the end of last year, 1,171 private lending platforms were shut down due to runaway managers and withdrawal difficulties—almost double from the previous year.
"These problems might be harder to deal with considering weak credit system in rural areas," said Xu.
Echoing his remarks, Huang Yiping, a central bank advisor, said that regulatory bodies need to address new risks emerging from digital finance, because risks would spread to other economic arenas.
Given the size and geographical dispersal of China, online microcredit companies can be supervised by local financial regulatory bodies under a unified nationwide legal scheme, according to Huang.