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Fintech and China’s big banks – China’s latest business and technology news


Reading news about Chinese banks can induce cognitive dissonance: Today, they are all about to collapse because of bad debts; tomorrow, they’re in a fine state and poised to profit from the coming consumption boom! Two of the most respected names in financial journalism this week illustrated the difficulty of reaching grand conclusions about the Chinese economy.

The Financial Times published a story (paywall) by Don Weinland titled “China’s traditional banks lose branding ground to internet rivals.” Its thesis is that “younger customers are choosing a bank on how convenient its app appears,” meaning that internet companies like Tencent and Alibaba have a huge advantage both in terms of brand and development of apps. Other new digital rivals that are chipping away at the dominance of traditional banks include peer-to-peer (P2P) lending and investment platforms, which allow users to crowdsource their financial needs, or to invest by giving interest-bearing loans directly to companies and individuals.

On the other hand, Bloomberg has an article by Nisha Gopalan titled “Fintech no threat for China’s big banks,” which says that the share prices of China’s traditional banks are being weighed down by concerns about bad loans and fears of tech companies like Alibaba and Tencent. However, Gopalan says that “investors shouldn’t worry” — bad debt figures are coming down, and the banks retain a central role in most people’s financial lives because bank accounts are where most people’s salaries are paid.

The FT and Bloomberg articles are not contradictory. Rather, they signal different things that will both probably happen: China’s internet companies are going to play a growing role in banking and finance, but whatever happens, the government will never allow private sector technology companies to replace the big state banks.


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Jeremy Goldkorn

Jeremy Goldkorn worked in China for 20 years as an editor and entrepreneur. He is editor-in-chief of SupChina, and co-founder of the Sinica Podcast.

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