Fintech Finance and Financial Fragility ― Focusing on China

Posted: 27 Nov 2017

See all articles by Rose Neng Lai

Rose Neng Lai

University of Macau

Robert A. Van Order

George Washington University

Date Written: November 21, 2017

Abstract

Financial Technology (Fintech) is evolving quickly within the financial system, giving rise to new forms of lending and opening up a version of shadow banking. This is particularly true in China. While Fintech finance and shadow banks can improve a banking system, they can also become new sources of fragility. This paper aims to provide a theoretical analysis of risks of Fintech finance to financial sectors, with particular examples for China. These risks are most likely to be important when Fintech moves beyond its technological focus and performs financial intermediation, particularly bank-like, functions. We provide implications for the evolution of Fintech finance as new sources of payments and funding. We propose “ring-fencing” as an approach to mitigate risks from contagion.

Keywords: Fintech, Shadow Banking, Contagion, Financial Fragility, Interconnectedness

JEL Classification: D85, G01, G21, G23, G28, O16, O17

Suggested Citation

Lai, Rose Neng and Van Order, Robert A., Fintech Finance and Financial Fragility ― Focusing on China (November 21, 2017). Available at SSRN: https://ssrn.com/abstract=3075043 or http://dx.doi.org/10.2139/ssrn.3075043

Rose Neng Lai (Contact Author)

University of Macau ( email )

Av. Da Universidade, Taipa
Macau, Nil
Macau

Robert A. Van Order

George Washington University ( email )

2121 I Street NW
Washington, DC 20052
United States

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