BEIJING (Reuters) - China’s central bank will closely monitor the development of Internet financial services to ensure companies do not cross any legal red lines, a senior central bank official said on Thursday.
Internet financing and traditional banking services complement each other, Liu Shiyu, a vice central bank governor, said in a speech published on the central bank’s website, www.pbc.gov.cn.
“We will encourage internet financial innovations and tolerate mistakes. But we will not tolerate fraud and other criminal activities,” Liu said.
Financial scams have multiplied in China as individual wealth grows, while a lack of financial knowledge and education means many people do not know how to protect their money.
Concerned at the potential for trouble, the government launched a crackdown on advertisements for financial scams in August [ID:nL4N0G2207], while a separate campaign against pyramid schemes begun in June led to the arrest of 560 people, according to the Ministry of Public Security.
China’s finance sector has been dominated by state banks, who traditionally focus on larger companies over the needs of smaller firms and individuals, leaving few options.
But Internet companies, including Alibaba Group Holding Ltd, Baidu Inc and Tencent Holdings Ltd, have started using their platforms to push financial products developed by finance management firms, looking to fill this gap in the market.
Retailer Suning Commerce Group Co Ltd has also moved into Internet finance, while Ping An Insurance Group Co of China and China Minsheng Banking Corp have both been collaborating with Internet companies.
Alibaba’s fund sales platform Yu E Bao, or “leftover treasure”, is this year’s most successful fund launch in China, attracting more than 100 billion yuan in funds under management and more than 30 million subscribers as of 15 November.
Liu said Internet companies “cannot engage in illegal fund-raising activity, cannot take public deposits illegally - these are two legal ‘red lines’ they cannot touch.” He did not elaborate.
Liu added that peer-to-peer (P2P) companies cannot set up “fund pools” and cannot make loans or provide guarantees for other borrowers at the same time. He did not elaborate.
The central bank will team up with other financial regulators and the police to crack down on fraud and other criminal activities on the internet, Liu said.
Reporting by Kevin Yao and Paul Carsten; Editing by Clarence Fernandez