Abstract
The financial sector in China is well known as a government-dominated hierarchy, and the access to financial services has been controlled primarily by the state-run banks. Fin-tech businesses, or so-called “Internet finance,” in China have included new actors such as Internet companies, small and medium enterprises, and small lay investors in the financial regime. The new entrants’ technology-mediated interactions with the government engendered new politico-economic relations within and beyond the market, in the cyberspace and in everyday life. How have the Chinese modes of financial inclusion reconfigured the power relations between the state, corporations, and the investing public in China? Through the political-economic analyses of three specific forms of fin-tech businesses—third-party payment, peer-to-peer lending, and money market fund this article argues that Chinese fin-techs have enabled a broader societal participation to investment practices and empowered Internet corporations alongside the state-controlled financial systems. Thus, such an inclusion is less about the “inclusive finance” endorsed by the World Bank for the under-represented social groups’ accesses to financial services. It is more of a technology-facilitated financialization initiated by the state, promoted by information technology companies, and popularized among small investors. Rather than leading to the decentralization of financial power, China’s fin-tech has formed a higher level of concentration of financial capital controlled by the Chinese oligopoly Internet corporations. Moreover, the collaborations and competitions between the growing fin-tech companies and the state-owned financial sector deserve further observations.
Introduction
A 2017 article in
In China, fin-techs were initiated in the form of “Internet finance” (
In the 18th Central Committee meeting in November 2013, establishing an “inclusive financial system” (
In addition to its economic impact, “Internet finance” has also developed as a socio-cultural discourse profoundly reshaping the public understandings of technology, wealth, and power. Since year 2013, mainstream media reports have devoted increasing attention to Internet finance, and portrayed it as the most successful model not only for financial businesses but also for innovative implications of information technologies (ITs). The societal enthusiasm toward Internet finance has led to the imagination of a liberalized financial market and attracted bursting investment from stock players and institutional investors (Wang, 2017).
In China’s finance sector, the power relations between the state, corporations, and the investors have often been criticized by market liberalists, private financial companies, and retail investors. In the early 1990s, China’s finance sector embarked on commercialization and marketization in its three sectors, the banking industries, securities market (primarily the stock market), and insurance market (Industrial Map of China Financial Sectors, 2012). The essential purpose of the financial reform in the last two decades is to turn the financial sector from a service organ of the other parts of economy (such as agriculture, industrial manufacturing) to economic entities profiting in the domestic and global market (Zhou, 2015). Yet, the reform has only limited to operational level, and the state still controls the majority of ownerships at major banks, security firms, and all the insurance companies. Together with the Central Bank of China, the mainstream financial industries have been instrumental for the state to manage the overall Chinese capital market (Fu & Hefferman, 2009).
The state-oriented strategy has expedited capital flows between government fund, mega corporations (mostly state-owned), and international businesses and excelled the liberal model in various financial sectors. However, the state ownership has often related to poor performance and low efficiency in mediating capital between dormant cash and companies in need of finance (Fu & Hefferman, 2009; Jiang, Yao & Feng, 2013). In the banking businesses, small and medium enterprises (SMEs) usually are rejected when they applied for business loans from banks. Small business loans are not attractive at all for large banks, and often labeled as high-risk profile due to their lack of collateral assets or credit-related information (Kshetri, 2016). In insurance sector, the government has assigned very little space to non-state companies to develop businesses (Xu, 2017). The Chinese stock market opened in 1990 for financial marketization; however, it has often been blamed for the governmental intervention. Unlike the market in developed capitalist economies where financial institutions and specialists are the major players, the financial market in China features the millions of small lay investors’ enthusiastic participation, as well as the state’s constant intervention (Hertz, 1998; Chumley & Wang, 2013). After the major stock plunge in 2009, the more than 54 million retail investors ridiculed the stock market as a gamble and a widely spread metaphor took the state as the largest dealer in the game who had never lost money upon any stock crisis (Chumley & Wang, 2013).
Given this long-lasting state dominance in the Chinese financial market, the growth of “Internet finance” has been taken as a revolutionary progress for a larger financial public. Digital financial technologies, or fin-techs, allow SMEs to access financial capital, assist IT companies to expand their business into financial sector, and their digital platforms provide more choices for investors, borrowers, and lenders. Since year 2012, a fashion of digital investment has affected the entire spectrum of Chinese social strata. Urban retirees, college students, and office workers conveniently turned their savings, pensions, and pocket money into financial investments using the Internet and various mobile apps. Digital technologies have afforded the development of fin-tech industries in China, and thus have created a new socio-economic domain co-existing with the mainstream financial system owned or controlled by the state. All these socio-economic changes embody an inclusive finance with Chinese characteristics. Has this technology-driven “financial inclusion” reshaped the structural relations in China’s finance sector? If so, what are the specific forms through which the digital capacities influence the social logics and cultural meanings of the powerful and powerless in financial contexts in China?
To answer these questions, this article draws upon the studies of socio-digital formation (e.g. Latham & Sassen, 2005) and examines the social-technical agency of financial technologies (Preda, 2006) constituting financial microstructures (Pardo-Guerra, 2012) in Chinese financial sector. Specifically, it analyzes the forms, mechanisms, and involved actors of three fin-tech categories: third-party payment (TPP), peer-to-peer (P2P) lending, and money market fund. In each category, this article focuses on the ensemble of policy changes, social transformations, and the development of digital financial technologies that shifts the power relations between the state and corporations. In the concluding section, the significance of China’s Internet finance to the growing global financial capitalism is also discussed.
Socio-digital formation and power relations in China’s Fin-tech regime
The concept of power is sociologically amorphous. Fundamentally, power means the probability that one actor within a social relationship will be in a position to carry out his own will despite resistance. However, power in real life embodies various kinds of dominance within a specific social context (Weber, 1978, p. 53). For instance, it can be a political dominance within and beyond a national system, or economic dominance at the domestic or international level, or sometimes the imbrications of these two types of commands. This article uses power to refer to economic domination of a group of actors over the others. Specifically, the powerful group owns the means of production (Marx, 1977), has institutional legitimacy to represent the economic interest of the public (Bockman, 2011), or manipulates cognitive mechanisms between institutions and the related human actors (Chassagnon, 2015). In a specific financial context, the power relations could be identified by interrogating who controls the access to financial capital (e.g. Epstein, 2005) and how has the flow of financial capital been accumulated and oriented (e.g. Toporowski, 2016).
The societal implication of digital technologies in financial businesses call into question the technological capacities of the Internet in disrupting the power order in the financial regime. Neo-institutionalists take fin-techs as part of the networked actors rendering formal policy changes (e.g. Kshetri, 2007; Shim & Sin, 2016) or new organizing logics of financial capital or resources (Gabor & Brooks, 2016). The sociological perspective emphasizes that the Internet has emerged as a major instrument for capital accumulation and the operations of global financial corporations. In the emerging electronic market (Sassen, 2012; Zaloom, 2006), new technologies enabled the formations of new business models and operational mechanisms in traditional financial industries, but barely transformed the corporations-dominated power structures global wide. Rather, the pyramid scheme has been reinforced and utilized by top tier actors, particularly the global financial corporations who are also the primary promoters of digital financial technologies, to extract resources from the lower levels of actors, particularly the large scale of retail investors. For instance, the high-frequency trading (HFT) using sophisticated algorithms to rapidly trade securities has helped the HFT users to have more chances of arbitrage. Critical media studies scholars argue that Internet-mediated information circulation between financial corporations and financial journalists is reflexive. The Internet, as a ubiquitous communication tool, has amplified homogeneous interpretations of financial data, and has thus been utility for financial corporations to attract more investment (Lee, 2013; Thompson, 2010).
In these researches, digital technologies are only instrumental for various actors in a fixed set of socio-economic relations which have also been reinforced through the adoption of technologies by these actors. Social factors affect the choice of technological options and shape their implications (Wajcman, 2002). Mechanical properties of communication technologies do not predestine the development of power structures. Rather, they serve for it. Second, corporations adopt and promote new technologies for higher efficiency, flexible management, and ultimately economic interests (Wajcman, 2002; Zuker, 1983). At the same time, their choices are often determined by the larger institutional structure in which they are embedded (Avgerou, 2002; Scott, 2008). Thirdly, the integration of new technologies in such a structure composed of users, experts, and corporations is a non-stationary process driven by multiple types of institutional forces, including organization culture, management orders, and super-organizational interventions (Avgerou, 2002).
Upon the rise of digital technologies since the 1990s, the concept of “socio-technical formation” (Wajcman, 2002) has been reconsidered and challenged by the idea of “socio-digital formation” which emphasizes the agency of digital technologies leading to structural changes and contextual reconfiguration (Latham & Sassen, 2005). Digital technologies have transformed the modes of production and have thus redistributed information and resources between users and corporations, which undermines the authority of corporations and experts (e.g. Benkler, 2006; Jenkins, 2006; Napoli, 2010). Furthermore, the capacities of Internet technologies enable the informational communication across the national boundaries (Latham, 2002) and bypass the state’s control (Guthrie, 2005). In the financial contexts, digital technologies have established the informational standards to which financial corporations, traders, and investors have abided during the business processes (Preda, 2009). Digital financial technologies have also constituted the markets (Bijker & Law, 1992) and microstructures (Knorr Cetina & Bruegger, 2012) at the domestic level, which urge the co-ordinations from the global financial domain. Furthermore, digital technologies enable financial automation (Pardo-Guerra, 2012) that increases the productivity of specific financial processes, improves transparency, efficiency, and equalities in an ideal market place. A more profound social consequence of digital financial technologies is that traditional dominators lose some of their political and symbolic prominence to novel types of intermediaries who have an allegedly closer control of sophisticated market technologies (Pardo-Guerra, 2012). Such changes in financial industries have engendered the reconfiguration of powerful and powerless within and beyond the newly formed digital financial market global wide.
Since year 2012, the rise of fin-tech industries in China has attracted practitioners and scholars to examine the business, political, and ethical dimensions of digital financial technologies in China. The majority of research works focus on the affordance of digital technologies engendering financial innovations and inclusive finance (e.g. Xie, et al. 2016; Zhao, 2017). Information and communication technologies such as the Internet, big data, and cloud-computing allow non-financial companies to provide financial products and services to a larger and more diversified social group and better meet their financial demand (Kshetri, 2016). Other work considers technological affordances subordinate to political interventions in Chinese context, and thus draws more attention to the policy and regulatory aspects of fin-tech development in China (e.g. Lee, 2015; Zhou et al. 2017). Since early 2016, the government’s permissive policies toward the technology-driven financial innovation have gradually turned into a set of stringent institutions that obscure the prospect of Chinese fin-tech industries. Although being a very minor segment of existing research, still other works shed light on the professional ethics of digital financial businesses (Loubere, 2016). Despite that the Chinese Banking Regulatory Commission (CBRC) has put an increasingly tighter stranglehold on emerging digital financial companies, there were still some cyber loan sharks providing high-interest loans to college students and then trying to control their bodies to secure the debts.
All these researches treat fin-techs in China solely as a business category and focused on its economic consequences. Most of them take the rise of fin-tech companies as an indicator of a more democratized financial system leading to inclusive finance in Chinese society. Yet, very few research have specifically demonstrated who used to be locked out but have been included in the formal financial system upon its digital transformation. As a result, the transforming capacities of digital financial technologies have only been reflected as part of the economic dynamics functioning within the framework of a fixed financial system dominated by the state and operated by the state-owned financial corporations.
This article takes an alternative point of departure analyzing Chinese fin-tech as a set of socio-economic activities with a societal-wide financial participation organized by digital technologies. Rather than calculating the business outcomes of fin-tech, this project focuses on how fin-tech, the marriage between digital technologies and finance—one of the most prominent domains in China—has created new social, economic, and political relations. Thus, it tends to provide a unique perspective to understand materiality and sociality of digital technologies in China’s financial contexts. In addition, as the Internet has enabled non-state actors, such as Alibaba, to enter international financial arenas once exclusive to states and the formal interstate financial system, this project also helps to identify the new growth paradigms of the global financial capitalism.
Digital financial technologies in China: three major forms
While Internet finance in China has developed a wide variety of business categories, the major services available to the public include TPP, P2P lending, and money market fund (Xie et al., 2016). This section analyzes each of the three forms of digital financial technologies with a focus on how they change the social, economic, or political relations between the involved actors, including the Internet corporations, the government, and individual consumers or investors.
TPP refers to payment services provided by the intermediary companies between the buyer (could be consumer or business) and the seller. The unsettled deals remaining are sources of risks, and the merchants (sometimes the buyers too) need such services to minimize systemic risks derived from the discontinuities of cash flow (Pardo-Guerra, 2012). The rapid growth of e-commerce since the 1990s propelled the development of TPP market, particularly the consumer-to-business sector (Shim & Shin, 2016). Online merchants do not manage their own online payments, they outsource it to a third party to handle instead (e.g. PayPal, CCBill, and Square).
TPP in China has been extremely popular among the users for efficiency, security, and also for fun. The online shoppers hooray for the convenient shopping experience enabled by AliPay, WeChat Wallet, and many other PayPal-like payment tools. Since the year 2010, TPP businesses have experienced more than 30% annual growth. Until January 2017, more than 480 million Internet users have used TPP in online shopping, and more than 370 million Internet users used TPP on their mobile phones in real store consumption (China Internet Network Information Center (CNNIC), 2017, January). Furthermore, gifting digital envelope has been an enjoyable approach to strengthen social ties since Tencent launched a WeChat Red Envelope scheme during the 2014 Spring Festival. The app allows users to gift random amounts of money to a selected number of friends, which often leads to grins and cringes among the envelope players. Until September 2015, Tencent had more than 200 million smartphone users to attach their bank cards to the app (Tencent, 2017)—thereby paving the way for purchasing on WeChat, an online chat app launched by Tencent which later on developed as an e-commerce portal for fashion products, hotels, transportation services, and entertainment products.
The more than 490 million Chinese e-shoppers and their money-related social activities have created an enormous flow of financial capital beyond the traditional banking system. Prior to TPP, e-commerce relied on credit cards or cash-on-arrival payment (Shim & Shin, 2016). The banking systems used to be the only “third party” to handle cash transaction but could hardly handle the complex clearing and settlement that occurred in the mushrooming online purchase by Chinese Internet and smartphone users. In 2008, Alibaba identified the new market and its prospects for financial business, and started providing escrow service, Alipay, that pooled trillions of cash for Alibaba. In June 2010, Chinese central bank announced the TPP licensing policy that attempted to integrate the online TPP companies into the formal financial system (The People’s Bank of China, 2010). The regulating policies locked out non-licensed smaller IT companies but provided a larger space for the Internet giants to develop many other financial derivatives based on the payment platforms.
If TPP reflects the inclusion of large IT corporations such as Alibaba and Tencent into financial sector, the second category, online loans, has expanded the territories of the Chinese financial industries by including millions of small lenders and micro-enterprises into the formal financial system. In 2013, the Xi-Li administration announced the “inclusive finance” strategy aiming to make financial services available for SMEs, rural population, and smallholder economic agriculture. Later on, the boundaries of loans market were extended to consumers who want to borrow money for large purchase, such as electronic home appliance and cars. Both consumer loans and the SME lending used to be locked out of the bank loan system due to the borrowers’ shortage of collateral assets.
Based on policy reform, digital financial technologies have effectively included new actors from both ends of the financial activities. On the lenders end, while the state opened the market of small lenders and micro loans to private capital, many Internet companies started to utilize the Internet to develop a niche online lending business. By March 2017, about 400 companies have registered as the members of the National Internet Finance Association (NIFA), a national self-regulatory organization initiated by the central bank and the state’s financial regulatory commissions. More than 140 members are IT companies 1 (as opposed to financial companies) that account for more than one-third of the Internet finance sector. On the borrowers end, the consumer loan products have been very much diversified, covering car, wedding, education, tourism, house renovation, and so on, not to mention the customized small business loans for start-up companies (Tao et al., 2017).
With the state’s authorizations to online loans, digital financial technologies have expanded the overall finance sector by integrating the Internet-mediated loans to the orthodox financial system. However, the state’s liberalizing tendency on Internet finance soon was pushed back by the rampant growth of fin-tech companies that are far beyond anticipation and have challenged the existing regulations. After the Ezubao, a dynamo of online P2P lending service, devoured more than US$7.6bn from almost one million Chinese investors with a Ponzi scheme in 2014, P2P lending suddenly became an alerting business containing both opportunities and risks and urging the state’s extra control (Gough, 2016). On 18 July 2015, China unveiled the
In the third category, digital financial technologies have enabled an unprecedented financial participation by small individual investors in Chinese society. In June 2013, Alibaba launched an online investment application, Yu’ebao, that allows people to transfer their dormant cash from their online payment account, Alipay, to an investment account. The app is extremely user-friendly and the users can invest from one Chinese Yuan (about 15 cents). Alibaba doesn’t charge any transaction fee, and the investors usually get higher return rate compared to their other investment, not to mention bank saving interest. In less than a year, Yu’ebao has attracted more than US$65bn from Chinese people who enjoyed being lay investors without technical or financial constraints. The difference between online banking (and/or online trading) and online investment is noteworthy. The former refers to financial businesses between investors and banks (or security agencies, such as Merrill Lynch) using the Internet as a medium, whereas in online investment, Internet corporations provide investment services and function as financial intermediary. Yu’ebao perhaps is the most elaborating case among the various online investment businesses.
Individual investor in China has been an intriguing subject for the social studies of finance. If the stock people, or gumin, constituted the Chinese investment crowd in the 1990s (Hertz, 1998), and the Wealth Management products (in Chinese called
Although the stock fever in the early 1990s was perceived as a societal-wide fashion of financial investment, the 300,000 stock people were mostly from the coastal area in China, particularly Shanghai and Shenzhen (Hertz, 1998), and most of them had disposable assets after fixed household expenses (Shao, 2008). The amount of active stock people kept growing in the past two decades and reached 54 million by February 2016. This social group has experienced two major stock plunges due to the 1998 and 2008 financial crisis. Many of them turned to Wealth Management Products (licai) that offered fixed returns (around 4%) but required larger amount of deposit (usually above RMB50,000 or US$8000). The low-risk feature of licai attracted millions of cautious retirees who had stayed away from the stock market (Chumley & Wang, 2013). In 2010, all the major banks in China started their relentless promotion of licai products and services. According to Fitch Ratings report in July 2013, the total wealth management products offered has tripled compared to the supply in 2010, and amounted to more than RMB12t. 2
Unlike the increasingly higher threshold defined in Wealth Management products, the online money market fund (Zhao, 2017) has made financial investment available to anyone who can access the Internet. In this sense, digital financial technologies have invited a wider societal participation to financial activities, and enabled the collaboration between IT corporations and financial companies who have collectively constructed a new long-tail market (Anderson, 2006). For instance, by the year 2016, Yu’ebao has aggregated more than 128 billion in financial investment from about 300 million Chinese lay investors. The colossal pool of capital goes to Tianhong Asset Management, the largest investment fund company in China that partnerships with Alibaba on the consumer finance businesses.
Discussions
The state-owned banking system used to monopolize the money flow between consumers and merchants. It also controls the collection and aggregation of consumer data based on which the national credit system is constructed. The formalization of digital TPP business embodies the rise of IT corporations in payment and clearance sector. In addition, the promotion of digital payment by IT companies among the Chinese Internet users has provided them convenient accesses to online small investment. Similar to how printing technologies had helped to disseminate church messages beyond parochial areas (Thompson, 1995), digital financial technologies help to send money faster, farther, and further, which is fundamental for the modernization and expansion of Chinese financial market. Such a socio-digital formation has created new centers and networks of financial powers which are primarily based on market and technological principles, and therefore are relatively independent of the political power. In this sense, financial inclusion is not only a top-down execution of policy changes, it is also an endogenous dynamic of financialization involving multi-level actors and facilitated by digital technologies. Novel implications of digital technologies have the capacities to transform existing power structures in a particular professional or territorial context.
Yet, the social meaning of technology-motivated structural changes is highly embedded in the domestic political institutions and, more importantly, in the growing global financial capitalism. Although Internet finance has introduced new actors and mechanisms to Chinese financial industries, it does not lead to the redistribution of financial capital among wider economic areas, or for public benefit. Instead, it leads to a higher concentration of wealth and resources at oligopoly IT corporations that have focused on developing new forms of speculative financial instruments and investments for their expansion in the financial regime. Specifically, the gross domestic product (GDP) growth from 2014 to 2015 in China is 5.5% (World Bank), but the revenue in Chinese finance sector in 2015 is more than 5.7 trillion, flagging a 16% increase in one year. Compared to the 10.2% increase in 2014 and 10.1% in 2013, 3 the GDP growth in the finance sector had been accelerating, which indicates a larger amount of capital flow into and circulate within the financial sector rather than contributing to the development of other industries. Internet finance companies, such as Ant Financial Group (AFG, Alibaba’s full subsidy in financial businesses), have been the most active and fast-growing actors. By March 2015, AFG has made a miracle-like growth by a 114% annual increase that accounts for US$22.9bn revenue.
In addition, the rise of IT corporations does not undermine the state’s overall control of the financial regime. The development of digital finance mainly focuses on the long-tail market un-attended by the state. As the Chinese IT tycoon Jack Ma frequently mentioned in his public talks, the traditional finance (mostly state-owned) does businesses with the 20% customers but gets 80% of the market revenue, whereas the Internet finance companies are trying to take the rest 20% market by getting the 80% customers. In addition, the regulatory control, particularly the licensing system, has always been an effective approach to enlarging the state’s overall financial hegemony. After legitimization and a 3-year promotion of Internet finance as a whole, the Chinese government started to strangle some specific sub-areas, such as online lending and consumer loans. Since the year 2011, the central bank has announced 22 types of licenses applied to various types of Internet finance businesses. It also holds the power to deny the companies’ re-applications after their existing licenses expired. New categories of licenses have been created to facilitate the state’s control on Internet finance sector and ultimately help to re-define the boundaries of state’s regulatory power.
For the growing investing public, digital financial technologies only intensify the speculative nature of their financial investment. Since the neoliberal reform in the late 1990s, cash incomes have been remarkably increased at the cost of the decreased state benefits, pensions, and insurance. The extra currency note issued in 2008 by Wen Jiabao administration led the inflation rate to 6% high (Choyleva, 2011). Although people have more cash in hand, they have never felt more worried about their precarious future (Chumley & Wang, 2013). For the younger generation that seems to worry less about their life after retirement, the increasingly higher living expenses, particularly apartment rental or mortgages, push them to the financial market all with a rags-to-riches dream. In the past two decades, digital financial technologies have helped to increase the number of Chinese investors, with highly diversified strategies, operating in a global, interdependent market at high velocity. The complex market underpinned by digital financial technologies is also closely tied to financial volatility while a larger amount of Internet-facilitated investors speculating the market in real time.
At the same time, digital financial technologies have been instrumental for the Internet corporations to extract money from the mass public’s saving account and form their own capital pool. In the Yu’ebao case, the growing investors group cut across all social strata, including students, office workers, and retirees; lately even rural populations joined in this game for wealth and for fun. In this game, the trading halls and platforms have been replaced by a very simple interface providing easier accesses to financial activities. For instance, behind the Yu’ebao app, it is Tianhong fund, the largest equity crowd-funding company in China. While the more than 300 million online investors enjoy the convenience and sense of participation brought by digital financial technologies, very few of them have realized the hidden corporative power managing the development of such technologies.
In China’s fin-techs, the state initially assigned the Internet as an instrument to marketize the financial sector and include non-traditional actors in the hope of enlarging the financial sector. However, the Internet has also been increasing the corporative power in the financial domain. In the past two decades, digital financial technologies have developed into a mass political-economic institution, bringing with its own technological, economic, and even political dynamic which extended beyond the terms policy makers had set for it. As digital technologies link the Chinese financial sector more closely to global financial markets, the extent and speed of the diffusion of financial movements is likely to increase, resulting in the increasing power of cyber business companies and, more importantly, further interdependence of markets and multiplying the sources of volatility at the domestic and global level. The interactions between regulatory control by the Chinese government and the capacities of digital financial technologies oriented by China’s Internet giants are pivotal to the emerging relations between the state, market, and public in Chinese society. Such relations have also been fundamental to the construction of financial capitalism in China and many other developing economies.
Conclusion
Fin-tech in China has experienced a rapid growth in the past decade but its socio-political dimensions have seldom been explored. This article combines sociology of finance, and science and technology studies, to tackle the interactions between digital technologies and the formation of power relations in China’s fin-tech businesses. The analyses of specific institutional and social settings in China’s financial development are useful for the wider application of studies on digital communication technologies, and also critical to understand the endogenous features and dynamics of financial inclusion, an increasingly prominent theme for economists and financial practitioners.
As shown in these three types of businesses, Internet corporations, digital financial companies, the Chinese government, as well as the individual users of digital financial technologies collectively constitute the promotional group of the fin-tech businesses in China, and they all claim or believe that fin-tech is an effective approach to the inclusive finance in China. However, the specific mechanisms of these three types of businesses actually show that the essence of financial inclusion in the Chinese context is quite different from the universal definition by the World Bank Group (WBG). WBG’s efforts in financial inclusion are to provide for the two billion poorest and unbanked people who don’t have formal access to financial services, including transactions, payments, savings, credit, and insurance (WBG, 2017). In contrast, Chinese fin-tech companies have merely addressed the demands of this much under-represented social group but to develop the market of average investors and small and medium enterprises which has yet been taken care of by the state-run financial corporations. In this sense, financial inclusion in China is less about including the displaced people such as women, rural poor, and other remote or hard-to-reach populations. It is more about popularizing financial services, especially small-scale investment or wealth management products among people who have not put their dormant cash into the financial market. It is more about financialization promoted by the state, Chinese Internet corporations, and the emerging digital financial companies.
Moreover, the WBG’s advocates of financial inclusion are to justify the financial divide rendered by the prohibitive costs to reach customers and gather information to assess financial risks. Chinese fin-tech practices, a new form of financialization, have demonstrated the structural inequalities that exist in an “equity-based economy” (van der Zwan, 2014). As of year 2016, the growth of Chinese financial sector has accounted for more than 48% of GDP rise. At the same time, the economic dominance transforms into a politically ruling power and generates larger ripples in social domains (Wang, 2015, 2017; Zhang, 2015; Zhang, Liu, & Luo, 2014).
At the global level, finance has been a major force driving the concentration of natural resources and money capital at the large corporations which have expelled a wider public from their living resources (Sassen, 2014). Since late 1990s, digital technologies have expedited the formation of international financial networks (Zaloom, 2006), and such networks have led to a higher level of control and concentration in the global capital market (Sassen, 2012). In the global financial capitalism, digital technologies have entitled the powerful corporations a larger power.
In the Chinese context, the fashion of digital finance since the year 2012 signifies the societal-wide financial implications of digital technologies. It has engendered structural changes in Chinese financial industries and entitled new spaces for non-state companies to provide financial services to a larger public. Yet, such structural changes hardly dismantle existing power relations. Moreover, it has enlarged the power of the financial sector (including the state-owned and private) and expedited and deepened the financialization in Chinese society. Internet corporations and digital financial companies have controlled the mechanism of capital allocation through the designs, uses, and promotions of digital technologies. In this process, the state is the initiator of the alternative financial model, promoter of the technology-driven financialization, regulator of the corporative power, and also the ultimate controller of the scaling financial regime.
Footnotes
Notes
Author biography
Jing Wang is a doctoral candidate in the School of Communication and Information at Rutgers University. She studies the uses, designs, perceptions, and social consequences of communication technologies in financial practices. Jing has published on the