Abstract: The world is witnessing the growing influence of the new economy dominated by the information industry. In China, with the rapid development of the internet industry, digital economy is in steady expansion; the new economy is serving as a new engine driving economic growth despite mounting downward pressure, and it helps meet the demands of the Chinese people for better lives. The new economic model calls for fresh forms of financial services. Typical of new finance is fintech, which plays an indispensable role in driving the upgrading of the modern financial industry. Development and application of fintech will be important indicators of the competitiveness of traditional financial institutions; fintech can greatly promote the development of inclusive finance; moreover, as regulations on fintech continue to improve in China, the industry will become more standardized. However, there are still risks in the fintech sector that cannot be overlooked. The government should be fully aware of potential risks and apply technology to improve financial regulation while ensuring the top-level design of fintech innovation.
I. The global impact of the new economy is growing
At present, the world is entering a period of new economic development dominated by the information industry. The influence of the new economy is growing. In recent years, the US economy outshines other advanced economies in the world thanks in part to the rapid revolution in its domestic technology industry. In 2009, the top US companies by market capitalization were traditional industry companies such as Exxon Mobil Corporation and WalMart. Today, companies such as Apple, Google and Amazon, which represent the new impetus, have become the upstarts in the US capital market. Based on its strong manufacturing base, Germany has integrated into the industrial Internet, connecting equipment, production lines, factories, warehouses, suppliers, products and customers. The government is also committed to making German industry more competitive by providing cheaper energy and a more competitive tax system for key industrial sectors. The emergence of the industrial Internet has provided new drivers and opportunities for manufacturing. France has seen some of the most innovative Internet companies emerge in the e-commerce and social sectors. The Netherlands is committed to building digital ecosystems and communities that provide the ideal place and environment for high-tech investment and operations. In addition to maintaining advantages in areas such as semiconductor materials and ultra-precision machine tools, Japan has in recent years promoted the use of robots and artificial intelligence to improve productivity.
II. China's new economic development has ushered in historical opportunities
At present, a new round of scientific and technological revolution and industrial transformation have brought historic opportunities for the development of the new economy. The new economy involves a wide range of businesses. It not only refers to the new forms of business in the Internet, Internet of things, cloud computing, e-commerce and other service industries, but also includes new models of intelligent manufacturing and mass customized production in industry, which have huge business opportunities.
Firstly, thanks to the growth in the number of Chinese Internet users and technology, China's Internet industry is developing rapidly and the scale of the digital economy is steadily increasing. The Internet industry not only reconstructs the traditional industry, but also continues to generate new models. China's digital economy remains vibrant and is becoming an important part of the country's core competitiveness, greatly helping boost economic growth and employment. China has seen the emergence of a number of highly successful Internet companies that remain at the forefront of the digital economy. President Xi Jinping stressed that the integrated application of blockchain technology plays an important role in new technological innovation and industrial transformation. We should take blockchain as the core technology and an important breakthrough in independent innovation to accelerate the development of blockchain technology and industrial innovation. At present, blockchain technology has been widely used in many fields. Blockchain technology can improve the efficiency of settlement and clearing, and reduce transaction costs. Blockchain technology has strongly promoted the innovation and application of digital currency. In the future, blockchain technology has the potential to play a role in industrial changes such as supply chain finance, medical informatization and education resource sharing. In the meantime, we still need to be vigilant against security loopholes in new technologies and strengthen guidance and supervision of new technologies.
Secondly, the new economy is becoming a highlight in China's economic downturn. In the first three quarters of 2019, the added-value of emerging strategic industries increased by 8.4% year-on-year, which was 2.8 percentage points higher than the growth rate of industries above designated size. The added-value of high-tech manufacturing industry increased by 8.7% year-on-year, which was 3.1 percentage points higher than industries above designated size. The development of high-tech industries not only meets the need of China's economic upgrading, but also serves as an important part of the supply-side structural reform.
Thirdly, the new economy could facilitate and enrich people's life. From mobile shopping to the sharing economy, then to smart devices, the new economy not only innovates the path of consumption upgrading, but also creates more jobs.
III. New economy calls for new finance
The new economic model calls for new forms of financial services. China's financial mode has always been dominated by indirect financing. Commercial banks play an irreplaceable role in serving the real economy. In the past, commercial banks paid more attention to the credit approval model of collateral. The above risk coverage model was based on stock, which complemented the operation of traditional heavy-asset industries. China's economy is transforming from investment-driven to innovation-driven; in the future, we will mainly rely on the risk pricing of the incremental value generated by technological innovation, to do equity financing instead of debt financing. The economic transformation is a process from traditional manufacturing to high-end manufacturing and service industries, some new business formats cannot provide mortgages and guarantees like traditional industries. Instead, they will rely more on equity financing for technology-based incremental value. New economy calls on financial institutions to provide financial services consistent with it.
IV. Fintech provides better financial services for the new economy
Fintech is a typical representative of new finance, a product of the deep integration of finance and technology, and an key engine driving the upgrading of modern financial industry. First, the development and application of fintech will be an important indicator of the competitiveness of traditional financial institutions in the future. Fintech is reshaping the behavioral model of consumers and enterprises. Therefore, financial institutions also need to use new technologies to improve service efficiency, improve risk control systems, integrate data sources, and finally complete digital transformation. This requires financial institutions to possess more basic knowledge and professional capabilities in technology and the digital economy. Traditional financial institutions long for technological empowerment, and many cases of major financial institutions cooperating with fintech companies have emerged in China. But this is only a new starting point. More work needs to be done to achieve deep integration with technology.
Secondly, fintech is an essential approach to promote inclusive finance. Fintech expanded the coverage of financial services, benefiting regions and groups that previously lack access to it. Fintech helps build sound social credit system and reduce the cost of financial institutions, which are equally important foundations for inclusive finance.
Finally, as regulations on fintech continue to improve in China, the industry becomes more standardized. In September 2019, the People's Bank of China released Fintech Development Plan (2019-2021), which proposed to build a sound framework for the development of fintech in China by 2021 to further enhance the technology capacity of the fintech sector. As the top-level design and the regulatory climate improve, a number of representative fintech companies have seen rapid growth.
In the future, the huge market and highly potential financial supply system in China will continue to bring about numerous possibilities for fintech's development, and fresh technological advancements will provide stronger support for the industry. Fintech, as a new production factor, is expected to serve as an important driving force for the supply-side structural reform of the financial sector and secure better financial services to support the new economic model. To make sure that fintech serves its purposes, the traditional financial sector must improve its technological and innovation capacities.
Meanwhile, risks in the fintech sector cannot be overlooked. As technology merges into the financial industry, the boundaries of different financial businesses may be blurred, causing financial risks to spread wider. We should remain vigilant against potential risks and apply technology to improve financial regulation while ensuring the top-level design of fintech innovation.
