China's Finance at Your Fingertips

China's manufacturing PMI (Purchasing Managers Index) has been falling for the past five months. The Caixin index in July was only 48.2, 1.5 index points lower than economists expected. Since the PMI (Purchasing Managers Index) has been on a downward trend, this explains why the productivity of the economy continues to decline. This situation is also related to the fact that the secondary industry used to be the driving force for rapid economic growth, but now the economy is gradually moving out of this situation and gradually entering a slow, stable and moderate growth stage, which is also the development stage experienced by most developed economies.

China's financial sector is certainly still developing, and there will be talent exchange between the technology industry and the financial industry. Chinese economists need to adopt more appropriate and specific policies to address the broad structural changes in the Chinese economy. Xie Jiaquan and Xu Junping of Guangdong University of Finance and Changsha Central Branch of the People's Bank of China explained in their market analysis that the growth startup market was listed as a second-class stock market in 2009, and the volatility of the market is positively correlated with the growth startup market. It is undeniable that P2P platforms provide a financing opportunity for small and medium-sized enterprises, and then the financing obtained by small and medium-sized enterprises is likely to make economies of scale possible. So when the market is in an unstable and fragile development stage, how will the government seize this opportunity and find the right strategy to keep the economy moving forward?

Internet finance in China is in its infancy and is moving towards a more regulated direction. Ten central government ministries issued a guideline on July 18 titled "Promoting the Healthy Development of Internet Finance". The guideline provides 20 recommendations on online payment systems, loan platforms, and crowdfunding sources, which are consistent with the core ideas of the 18th National Congress of the Communist Party of China. Although the guideline only provides a general overview of the government's official development recommendations, in China, such guidelines are usually taken seriously as a policy framework.

As payment systems become more technologically advanced, higher-risk products can also appear on Internet financial platforms. The above guidance is intended to combat illegal online transactions to protect private investors and to patch up loopholes in funding channels.

There is a consensus on the development of P2P lending in China, that is, P2P has not yet formed a strict institutional norm. The banking industry has realized the huge opportunities provided by Internet finance and has been trying to take advantage of them. For example, China Construction Bank established its online banking system as early as 1999. In the following decade, the technology of financing through Internet platforms was gradually accepted and applied.

The development of P2P platforms in China depends largely on the government's efforts and measures to monitor and encourage the development of the industry. Internet companies are at the forefront of the Internet finance movement and are actively collaborating and acquiring financial companies in order to participate in this new movement to provide financial products to customers with instant efficiency. Due to the booming mobile payment market and the development of third-party payment industry to complete transactions, the offline transaction market is gradually shrinking. At this rate of development, the question facing the industry is whether the government's policies can keep up with its growth.

The trend of investing in "concept stocks" is gradually shifting to investing in real, investable performance stocks. People are also gradually becoming more aware of the development potential of P2P lending and mobile payment platforms. At such an important development period, the government should encourage the public to learn more about the risks and restrictions of the industry as much as possible, and also learn more about the channels for participating in Internet finance, which will help domestic investors make more informed and prudent investment decisions. In addition, the government should also strengthen risk disclosure policies and improve investment qualification standards for qualified investors in order to establish a healthy and competitive platform. The "one bank and three committees" composed of the People's Bank of China, the China Banking Regulatory Commission, the China Securities Regulatory Commission and the China Insurance Regulatory Commission will play a more important role than ever before.