Guangzhou to host fintech projects in government sandbox in race with Beijing, Shanghai

The southern Chinese city of Guangzhou has joined Beijing, Shanghai and Shenzhen in boosting local fintech innovations by introducing a sandbox programme that allows stock exchanges, as well as securities and futures companies to experiment with new technology initiatives, according to a plan unveiled by local authorities this week.

The plan is aimed at building a “prudent and tolerant” regulatory environment, and facilitating the “digitisation of the capital market”, according to a notice published by the Guangzhou Municipal Local Financial Supervision and Administration. The project has received the blessing of the China Securities Regulatory Commission (CSRC), officials said.

Guangzhou’s move is part of a rising trend in China that has seen local governments and licensed financial institutions pushing the use of fintech, after Beijing rooted out businesses that it deemed harmful, such as peer-to-peer lending and crypto exchanges.

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According to the Guangzhou notice, local bourses, broker-dealers, fund management companies, and other CSRC-approved companies can apply to join the programme. Participants are encouraged to use big data, cloud computing, artificial intelligence, blockchain, and other technologies to empower their financial products and services, according to the announcement.

During the pilot period, participants that ran into information security issues may be exempted from punishments if they did not cause severe losses to investors or significantly affect the market order, the regulator said.

The fintech sector, which came under strict scrutiny after the abrupt halt of Ant Group’s mega IPO in late 2020, has been repeatedly targeted by regulators amid a crackdown on the wider tech industry.

Ant went through several restructures to address the risks it might pose to China’s finance sector. It was also told to spin off its microcredit and consumer credit services. Ant is an affiliate of Alibaba Group Holding, owner of the South China Morning Post.

The clampdown on the fintech industry extended into the beginning of this year, when the country’s top financial regulators, including the People’s Bank of China (PBOC) and Ministry of Industry and Information Technology, proposed new rules that would ban the unlicensed sales of insurance and securities services on social media.

Earlier this month, the chairman of the China Banking and Insurance Regulatory Commission (CBIRC) Guo Shuqing said “self-inspections” by fintech platform operators, including Ant, had “gone well”.

Meanwhile, Chinese regulators and local authorities have started expressing strong interest in developing fintech under their control. In Alibaba’s home province of Zhejiang last week, PBOC and local officials said they encouraged tech innovation in financial services with “controllable risks”, under “effective regulations”.

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