SOCIETÀ ITALIANA DI DIRITTO ED ECONOMIA
Panpan Sun (university of warwick)
Abstract
The integration of technology into the financial industry has brought forth a wide range of innovative financial products, including third-party payment systems, online peer-to-peer (P2P) lending, and equity crowdfunding (ECF). However, the convergence of technology and finance also introduces significant risks and uncertainties, challenging existing financial regulatory frameworks and governance structures. This research combines empirical investigations into China's emerging experimental equity financing market with theoretical studies in economics and political regulatory frameworks to comprehensively understand how economic and political forces interact and shape regulatory outcomes. It reveals regulators face challenges in balancing the regulation of fintech innovations and implementing protective regulations, hindering the achievement of goals such as financial market stability, consumer rights protection, and the promotion of financial innovation.
This research also employs an interdisciplinary perspective, combining theories from law, political science, and economics. It analyses China's financial regulatory system, including its operational model, rationale, supporting tools, reforms, and potential issues. Through the lenses of classical bureaucratic institutional theories, it is evident that China's financial regulatory system is essentially a tightly structured bureaucratic organization, with the political party at the apex distributing regulatory power to enforce authoritarian rule. The prevalence of personalised governance and informal structures within this framework gives rise to challenges such as excessive political intervention, regulatory elasticity, bureaucratic conservatism, political inertia, outdated regulatory ideologies, and the overuse of emergency regulatory tools.
In response to historical regulatory obstacles and to enhance regulatory efficiency, Chinese authorities initiated comprehensive financial regulatory system reforms in March 2023. This research employs Ronald Coase's cost-benefit theory and comparative institutional analysis as a framework, integrating recognized key elements of effective regulatory systems to assess the reformed system. The assessment investigates whether the restructured system can achieve its intended objectives, rectify previous shortcomings, and enhance operational efficiency. The conclusion drawn is that while the 2023 regulatory system reform shows signs of improvement, it retains elements reminiscent of the old system. The reform falls short of fully addressing historical regulatory inadequacies and exacerbates existing bureaucratic issues. A deeper investigation into regulatory insights and experiences from other jurisdictions becomes imperative to effectively address current challenges and refine China's regulatory structure.