The Coronavirus crisis’ repercussions on fintech in China
Hi everyone, my name is Steve Hopkins. I’ve been operating within the Chinese fintech industry for the past several years, working at Chinese hedge funds, robo advisors, cryptocurrency investment banks and wealth-tech start-ups across Mainland and Hong Kong. I’ve been studying Chinese language and culture for the past 10+ years and I’m the co-founder of The China Guys. TCG is a firm full of professional Chinese watchers that track regulatory, economic and policy optics within China’s business landscape and present them indigestible bite-sized pieces through newsletters and research articles. For clients with more specialized needs we also provide tailored consultative services within the Chinese market. We’re newly started but I would love it if anyone listening to this would check us out at TheChinaGuys.com. I’m excited to be presenting this talk for Daxue Consulting and let’s get started.
Full transcript below:
How has the coronavirus outbreak impacted China’s fintech ecosystem?
So firstly before answering this question, I think it’s right to say first of all that it’s terrible to see the crippling effect that the coronavirus has had on China and now that it’s beginning to spread to a few other countries around the globe, our hearts really go out to everyone affected and I’m personally encouraged to see the sort of international support that’s beginning to bring people together across borders and cultures.
But, now getting back to the question of how the coronavirus has influenced fintech in China – in terms of Chinese fintech it’s really had a pretty lasting impact, but it’s fairly immeasurable until everything is settled down. so, Because of the comprehensive economic depression that this virus has brought, private funding has all but dried up. Which means that SME’s are cut off from external liquidity with their own reserves either being spent or quickly bottoming out and this I guess in turn had led to the central government mandating that banks across the country relax lending requirements for SME’s during this time, but – well that will buy time for these SME’s that are kind of getting to the point of a cash crunch, at the end of the day, several months or quarters down the road, it’s also going to add additional pressure to the overall Chinese economy at large, particularly the financial industry – to this banking system that’s already been overburdened by bad debt and high default rates just by adding more bad debt and high default rates on to that. And so, I’m not quite sure that there’s been much fintech innovation directly driven by this outbreak. There might be a new appreciation for digital payments and the e-commerce industry in general as people are trying to minimize exposure and human interaction to try to contain the spread of the virus, but I can definitely see the general fintech environment rallying after the entire society begins to normalize, people start getting back into their old routines, etc. and so – it’s pretty simple to see why the central government has their own economic benchmarks that they’re trying to hit, for growth and they’re going to basically do whatever they can to try to hit those targets. And so, they’re going to flood the industry I project with capital to show their support for fintech – it’s a priority industry, so it’s that simple.
When you have the capital, when you have the governmental support within the Chinese market, you’re going to have kind of a re-blossoming of the old innovation that was taking place before the industry got hammered by the virus.
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