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 China should establish a sophisticated licensing regime and setout 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.

Using cross-border holding data from all custodians in China’s Stock Connect, we provide evidence that Chinese mainland insiders tend to evade the see-through surveillance by round-tripping via the Stock Connect program. After the regulatory reform of Northbound Investor Identification in 2018, the correlation between insider trading and northbound flows decays, and so does the return predictability of northbound flows. The reduction of return predictability is especially pronounced among less prestigious foreign custodians and cross-operating mainland custodians, behind which mainland insiders are more likely to hide. Our analysis sheds light on the role of regulatory cooperation over capital market integration.

We investigate banks' issuance choices of wealth management products (WMPs), which are both interest rate deregulation vehicles and shadow deposits without explicit government insurance. Support for an inverted-U shape between market share and WMP issuance is found in national market. State-owned banks are reluctant to issue WMPs due to their monopoly power, very small banks do not have the capacity to issue while small and medium banks issue WMPs intensively as a regulatory arbitrage. Moreover, the geographic deregulation in 2009 stimulates the bank competition in the local market, incumbent banks take advantage of WMPs to fight off the new entering banks.

We study non-performing loan (NPL) transactions in China using proprietary data from a leading market participant. We find these transactions – driven by tighter financial regulation – are consistent with banks concealing non-performing assets from regulators as (i) transaction prices do not compensate for credit risks; (ii) banks fund the NPL transactions and remain responsible for debt collection; and (iii) 70% of NPL packages are re-sold at inflated prices to bank clients. These results imply NPL transactions do not truly resolve NPLs. Recognizing the hidden NPLs implies the total NPLs in China is two to four times the reported amount.

By analyzing a hand-collected transaction-level dataset on the finance leases of China’s public firms for the period 2007-2019, this paper sheds light on China’s financial leasing industry. We find that banks use their affiliated leasing firms to provide credit to constrained clients in order to circumvent the government’s targeted monetary tightening policy. Finance Lease offsets the expected decline in traditional bank loans in affected industries, and therefore hampers the effectiveness of the monetary policy. Although this regulatory arbitrage may accumulate systemic risk at the macro level, bank-affiliated leasing firms charge lower leasing rate and exert tighter risk control than non-bank-affiliated leasing firms at the micro level. This finding indicates that banks use finance leases as a channel to keep low-risk clients rather than to make excessive profit.