Asia Fintech Weekend Read

Why 2021 Will be a Big Year for Fintech in China

China has one the world’s largest fintech markets and it is only set to continue to grow in 2021. To get a good idea of what direction the industry will take, here are the key stories to look out for.

Covid-19 Recovery

As we move into 2021, it is impossible to look forward without considering the tremendous impact the health crisis has had on economies throughout the world. Hit first by the outbreak of Covid-19, China has worked aggressively to keep outbreaks to a minimum.  This has allowed the Chinese economy to recover quickly. After a disastrous first half of the year, the GDP growth rate for 2020 is estimated at slightly above 2%. 2021 will be a bounce-back year with the economy forecast to grow at 8%.

Fintech will be a big part of this story. Digital everything has seen a big increase in the past year. As the number of mobile payment users approaches the 1 billion figure, transaction volumes are expected to continue to grow at a double-digit pace. China is leading the way in areas such as facial recognition for payment platforms, big data analytics for credit checks, and quick underwriting for the rapid approval of loans. It is estimated that now 90% of China’s banking transactions occur online and some 4 out of 5 payments occurring through mobile. With a vibrant investment landscape expect many more new technologies seeking to meet the ever-changing demands of the Chinese market.

Industry to Follow Government’s Five-Year Plan

In October, Communist Party officials met to discuss China’s 14th 5-year plan and published an initial communique outlining the country’s economic goals for the 2021-2025 period. The full plan will be released and adopted in spring during the annual session of the National People’s Congress, which will provide more colour and detail.  In the meantime, we can already see some emerging trends. The tech sector is highlighted as key to “implementing the innovation-driven development strategy” in order to foster a modern financial system. Specific areas have yet to be identified but expect a focus on investment in digital infrastructure and the directive to bring financial services to rural areas to create more prosperity. Other initiatives will help cement China’s role as a leader in big data, artificial intelligence and fintech. In a state-led economy like China, these five-year plans specify areas where the government will focus their attention and resources. The industry has long taken cues from the central authorities for where to find new opportunities.

Expansion of China’s Digital Currency

Since 2014, China has been working to develop a digital currency, aptly named the Digital Currency Electronic Payment (DCEP). Initial trials have already begun and there will be a bigger push throughout the year. The Chinese see a digital currency as a means to diversify away from the dollar, and a way to integrate a large unbanked population into the mainstream economy. Unlike bitcoin and other cryptocurrencies which boast anonymity, China will be able to track its DCEP through the economy which will have the benefit of reducing tax leakages and capital flight.

Trials for DCEP are taking places at locations around the country with the island of Hainan and the city of Shenzhen being key centres for these pilot programmes. A target date for general adoption is thought to be next year’s Winter Olympics, meaning a widespread launch could come sometime later this year.

Ant Financial to Finally IPO?

When Ant Financial, China’s leading fintech backed by Alibaba’s founder Jack Ma, announced their plans to go public, investment banks were lining up for the chance to cash in on what was projected to be one of the most valuable offerings of all time. How disappointed they must have been to see that the filing has been delayed indefinitely. Instead, Ant has been ordered by the Chinese government to streamline their lending practices and raise additional capital.

While this rapidly developing story makes it difficult to assess exactly where Ma and Ant will end up, two things are clear. No company or individual is bigger than the state and internet finance and P2P lenders can expect renewed scrutiny from regulators. How aggressively China looks to clamp down on this sector and the impact on the next round of unicorns will be something to watch.

New Data Protection Laws Will Force Companies to Adjust

2021 will likely see the implementation of China’s new Personal Information Protection Law. Like GDPR, this data protection law lays out the requirements for the collection and processing of personal information. Any company that is accessing and using the personal information of Chinese residents will have to comply with the law, even if they don’t have a legal presence in China.

Data is the fundamental resource that many tech companies are built upon. The potential impact of a wide-ranging law that is certain to increase costs could be immense. Domestic companies will have to beef up their compliance departments. Foreign firms will need to carefully consider how they are approaching China. These multinationals may be forced to keep Chinese data local by either onshoring or finding a local Chinese partner to house the information.

The draft law is showing potential penalties of up to 50 million yuan (£5.7 million) or 5% of annual turnover. Even more likely to get the attention of leadership is the threat of personal fines or even criminal action for managers. All of this is to say that China is serious about instituting a new data regime and that companies will have to adjust to satisfy the new framework.


  • Avi is a finance and investment professional with a deep interest in fintech. Based in London he works for the UK’s leading China-focused trade organisation, the China-Britain Business Council, helping firms with their China strategies. Originally from the US, he is a Mandarin speaker and has been working with China for more than 10 years including living in Beijing for four. He worked for multiple years in real estate investment prior to moving to China and has a BA in Economics from Reed College.

Related posts

Episode Six: Why Banks, Neobanks and Fintechs Must Integrate New Payments Tech and Crypto ASAP

The Fintech Times

Binance: Helping To Build Financial Freedom in Africa With Cryptocurrency and Blockchain

The Fintech Times

Stratiphy App to Encourage Sustainable Investing

Polly Jean Harrison