Many investors and key fintech players around the world have taken increased notice of China in recent years. According to Sūn Shuǎng, an analyst at Beijing-based fintech knowledge service institution 01 Caijing, this attention is well-deserved. Speaking at an Asian Financial Society event in New York City last week, Shuǎng asserted that China has emerged as the world’s fintech hub based on its 2018 deal volume.
As Shuǎng noted, approximately 600 of last year’s completed fintech deals were based in China, outpacing the United States, India and Singapore. China also tops the rest of the world in terms of fintech investment companies, as five of the top eight such firms globally are based in China. The number of Chinese fintech “unicorns”—that is, those fintech startups that have achieved valuations in excess of $1 billion—is also growing; the Brookings Institution found that of the 27 fintech unicorns globally, nine are based in China and Hong Kong.
However, Shuǎng pointed out that there are certain unique challenges facing the fintech industry in China. First, China has faced a growing issue of money raised through its P2P lending operators being taken abroad. According to Shuǎng, Chinese regulators have attempted to address this “fraud” by tightening regulations in a number of ways, such as placing new limitations on areas of operations for platforms with loan balances below $15 million.
Second, the situation surrounding blockchain in China remains complex. According to Shuǎng, thirty-four banks across China have begun exploring blockchain-related practices. The focus of this blockchain exploration has been mainly on supply chain finance, trade finance and digital notes rather than money transfer and asset management. This approach is due in part to China’s ban on cryptocurrency exchanges. However, as Shuǎng points out, cryptocurrencies such as Bitcoin still exist in China; however, such cryptocurrencies must function as assets rather than currency, with peer-to-peer replacing the banned exchanges.
Lastly, Shuǎng observed that certain fintech sectors are especially successful in China. For example, a lack of traditional banking services in the country has led to an enormous growth in mobile payment services, setting China up to continue to be a major fintech hub in the coming year.