From Credit Information to Credit Data Regulation: Building an Inclusive Sustainable Financial System in China

Washington International Law Journal (2024, Forthcoming)

University of Hong Kong Faculty of Law Research Paper No. 23/54

63 Pages Posted: 20 Sep 2023

See all articles by Menglu Wang

Menglu Wang

The University of Hong Kong - Faculty of Law

(Robin) Hui Huang

Chinese University of Hong Kong - Faculty of Law; 华东政法大学(East China University of Political Sicence and Law); University of New South Wales - Faculty of Law

Douglas W. Arner

The University of Hong Kong; The University of Hong Kong - Faculty of Law

Date Written: September 2023

Abstract

A lack of sufficient information about potential borrowers is a major obstacle to access to financing from the traditional financial sector. In response to the need for better information to prevent fraud, to increase access to finance and to support balanced sustainable development, countries around the world have moved over the past several decades to develop credit information reporting requirements and systems to improve the coverage and quality of credit information. Until recently, such requirements mainly covered only banks. However, with the process of digital transformation in China and around the world, a range of new credit providers have emerged, in the context of financial technology (FinTech, TechFin and BigTech). Application of advanced data and analytics technologies provides major opportunities for both market participants – both traditional and otherwise – as well as for credit information agencies: by utilizing advanced technologies, participants and credit reporting agencies can collect massive amounts of information from various online and other activities (‘Big Data’), which contributes to the analysis of borrowing behavior and improves the accuracy of creditworthiness assessments, thereby enhancing availability of finance and supporting growth and development while also moderating prudential, behavioral and conduct related concerns at the heart of financial regulation.

Reflecting international experience, China has over the past three decades developed a regulatory regime for credit information reporting and business. However, even in the context of traditional banking and credit, it has not come without problems. With the rapid growth and development of FinTech, TechFin and BigTech lenders, however, have come both real opportunities to leverage credit information and data but also real challenges around its regulation. For example, due to fragmented sources of borrower information and the involvement of many players of different types, there are difficulties in clarifying the business scope of credit reporting and also serious problems in relation to customer protection. Moreover, inadequate incentives for credit information and data sharing pose a challenge for regulators to promote competition and innovation in the credit market.

Drawing upon the experiences of other jurisdictions, including the United States, United Kingdom, European Union, Singapore and Hong Kong, this paper argues that countries, including China, should establish a licensing regime and set out differentiated requirements for credit reporting agencies in line with the scope and nature of their business, thus addressing potential for regulatory arbitrage. Further, there is a need to formulate specific rules governing the provision of customer information to credit reporting agencies and the resolution of disputes arising from the accuracy and completeness of credit data. An effective information and data sharing scheme should be in place to help lenders make appropriate credit decisions and facilitate access to finance where necessary.

The lessons from China’s experience in turn hold key lessons for other jurisdictions as they move from credit information to credit data regulation in their own financial systems.

Keywords: Credit reporting, Creditworthiness assessment, Credit information regulation, Credit data regulation, Information sharing, Data sharing, Open banking, Open finance

Suggested Citation

Wang, Menglu and Huang, (Robin) Hui and Arner, Douglas W., From Credit Information to Credit Data Regulation: Building an Inclusive Sustainable Financial System in China (September 2023). Washington International Law Journal (2024, Forthcoming), University of Hong Kong Faculty of Law Research Paper No. 23/54, Available at SSRN: https://ssrn.com/abstract=4558480

Menglu Wang

The University of Hong Kong - Faculty of Law ( email )

Pokfulam Road
Hong Kong, Hong Kong
China

(Robin) Hui Huang

Chinese University of Hong Kong - Faculty of Law ( email )

Shatin, New Territories
Hong Kong
852-39431805 (Phone)
852-29942505 (Fax)

HOME PAGE: http://www.law.cuhk.edu.hk/app/people/prof-robin-huang/

华东政法大学(East China University of Political Sicence and Law) ( email )

1575 Wanhangdu Rd.
Changning, Shanghai 200042
China

University of New South Wales - Faculty of Law ( email )

Sydney, New South Wales 2052
Australia
61-2-9385 9649 (Phone)
61-2-9385 1175 (Fax)

Douglas W. Arner (Contact Author)

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

The University of Hong Kong - Faculty of Law ( email )

Pokfulam Road
Hong Kong, Hong Kong
China

HOME PAGE: http://hub.hku.hk/rp/rp01237

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