A passerby looks at QR codes printed on T-shirts in Zhengzhou, capital of Central China's Henan Province, on Sunday. A local company hired college students to promote its business, and people who scanned the code could get a free mouse pad. Photo: CFP
There should be a moderate level of supervision of Internet finance, but excessive intervention is unadvisable, the People's Bank of China (PBC), the country's central bank, said Monday in response to recent debate about regulation of the nation's bourgeoning Internet finance sector.
"Financial innovations that benefit the real economy and promote growth in start-ups deserve respect and encouragement," said a question-and-answer transcript of an interview with an unnamed senior PBC official by the Xinhua News Agency.
There needs to be tolerance of glitches in order to fuel innovation, but risks arising from the glitches must be under control, said the transcript, which was posted on the central bank's website on Monday.
The PBC's remarks came after it said on March 13 that it was suspending the launch of online credit cards by Internet giants Alibaba Group and Tencent Holdings, as well as suspending payments via scanning Quick Response (QR) codes.
"It is suspension, not termination," the PBC official stressed in the Monday transcript.
Both virtual credit cards and code-scanning payments still have a future in China, but only after security concerns are addressed, said the official.
Debates about supervision of online finance were also heightened following media reports about tough new draft regulations for third-party payment providers outlined by the PBC, with public opinion being sought on the new regulations till March 13.
But the unnamed official said administrative rules for online payment won't come into being before agreement between all sides can be reached.
A national association for Internet finance will also be established to help ensure the healthy development of the sector, the official disclosed.
"We won't comment on the central bank's remarks," Zhang Daosheng, a spokesperson for Alipay, the online payment unit of Alibaba, said Monday when reached by the Global Times.
However, Zhang said "we have always been deeply encouraged by the central bank's support and tolerance for innovation in Internet finance."
Internet finance has been growing quickly in China since June last year when Alipay launched Yu'ebao, the country's first online monetary fund.
Oversight of Internet finance has become a contentious issue since then, and "there are no regulations in other parts of the world that can be referenced for designing China's rules," Zhao Xijun, deputy head of the Finance and Securities Research Institute at Renmin University of China in Beijing, told the Global Times Monday.
Addressing security risks associated with transactions made online and highlighting the protection of consumer rights should be given priority in making the laws, Zhang suggested.
Meanwhile, China's Big Four banks have recently put limits on transfers through Alipay, citing safety concerns.
Alibaba Chairman Jack Ma Yun said Saturday in a post on the company's messaging app Laiwang that this might be "the most difficult yet most glorious moment" for Alipay.
He said that users would decide market success, rather than firms with monopolistic positions.
China UnionPay Merchant Services (UMS), a subsidiary of the national bank card association, retained top spot in the country's third-party payment market in 2013, with a 42.51 percent share in terms of transaction volumes, according to data from Beijing-based Internet research consultancy Enfodesk.
Its two closets rivals - Alibaba's Alipay and Tencent's Tenpay - posted a share of 20.37 percent and 6.69 percent, respectively.
"The game between existing financial institutions and Internet companies that are late-comers in the financial world has just begun," Zeng Linghua, chief analyst at Shanghai-based fund consultancy Howbuy, told the Global Times Monday.
Internet firms can still succeed, despite having to compete with large banks, Zeng said.
