China's Internet finance on road towards rational development

China's ministries have unveiled guidelines on Internet finance to regulate market order and further clear regulatory responsibilities.

It's the first time Chinese government regulators' make their presence in this industry, which brings promotion, guidance, and warnings in order to direct it to a sound and stable development, as industrial insiders and observers believed.

A "yes" to e-finance

Internet finance, also know as e-finance, refers to loans, investments and other financial services provided through online channels rather than through banks and other financial institutions.

Promoted by information technology and rapid growth of e-commerce, Internet finance has emerged in an explosive development in China, with more and more innovative business modes enlarging its market scale, and with ever-increasing fame to every household and in global e-financial sectors.

To that, the Chinese government says "yes" as the newly-released guidelines encourage innovation in e-financial platform, products and services and collaboration among institutions.

E-finance was described as "dark horse" and has been previously integrated into the national "Internet Plus" action plan.

The guidelines insist on a market-oriented mindset in developing Internet finance and aim to serve the real economy. Internet finance could help small and micro enterprises with investment and fund raising, and also upgrade the quality and efficiency of financial services.

Caution! Risks

Analysts say it's a favorable policy for this sector, which gives a clear identity of e-finance and draws its boundary, encouraging innovation and control risks.

Internet financial modes such as the third-party payment，peer-to-peer，crowdfunding, Internet banking developed rapidly though difficulties and setbacks in the past couple of years.

While e-finance in China made breakthroughs in the development in 2014, financial fraud, illegal fund-raising, etc., have been destructing the financial ecology.

Therefore, besides encouragement that need to bring out new ideas and policy support, the guidelines work to formulate a better system. Industry self-discipline is also required to build a sound and honest environment for Internet finance players.

Guidance to sound development

The guidelines were jointly released on Saturday by ten central government ministries and industry regulators, including the People's Bank of China (PBOC), the Ministry of Industry and Information Technology, the Ministry of Finance and China Securities Regulatory Commission.

The guidelines clearly define peer-to-peer Internet lending, put strict guidelines on fund depository and Internet insurance and trust.

It is believed that the guidelines, filling in the regulatory gap in this new industry, bear milestone significance.

Industrial insiders also foresees an ending to "rampant growth" of e-finances and reshuffle of this industry. At the same time, traditional and emerging Internet finance platforms are expected to join hands.