An artificially low interest rate on household savings is a common form of financial repression in developing economies and typically benefits incumbent banks. Using proprietary data from a leading Chinese FinTech company, the authors study the role of Fintech in ending the financial repression by introducing to households money market funds (MMFs) with deposit-like features. Cities and banks whose depositor base are more exposed to FinTech see greater deposit outflows. Importantly, banks respond to FinTech competition by offering their own products with market interest rates. FinTech thus facilitates a bottom-up interest rate liberalization.
About the Seminar Series
Financial market development goes hand-in-hand with economic growth. The development of China’s capital markets in terms of size, regulations, capability, and efficiency has been impressive. China may now even lead globally in some dimensions, notably e-payments systems. Yet, China’s capital markets are still a work-in-progress facing both generic and unique challenges. Other Asian capital markets have even greater uneven development. Some in advanced Asian economies have acquired globally acclaimed reputation and capabilities while various regulatory and structural weaknesses dwarf others. Corporations and investors have been inclined to arbitrage cross-border regulatory and developmental gaps; so the very uneven status of capital markets across Asia is a policy issue for the governments in the entire region and perhaps globally. Analyzing the positive and negative lessons in the functioning of Asia’s capital markets, and identifying reforms and applications of technology that could further improve Asian capital markets’ allocation efficiency, financial inclusion, and forewarning against reforms that might cause problems can benefit practitioners, policymakers and researchers, and can contribute significantly to overall prosperity.
The ABFER and the University of Chicago’s Becker Friedman Institute China (BFI-China), in collaboration with National University of Singapore (NUS) Business School, Shanghai Advanced Institute of Finance (SAIF), The Chinese University of Hong Kong (CUHK) Department of Economics, CUHK-Shenzhen and Tsinghua University PBC School of Finance (Tsinghua PBCSF), hope to provide a virtual network to benefit researchers, policymakers, and practitioners from Asia and beyond.
All times are listed in Central Standard Time. A unique Zoom webinar link will be sent to you two days before the event.
Each session lasts for an hour (30 minutes for the author, 15 minutes for the discussion, 15 minutes for participants’ Q&A).
Wednesday, October 20, 2021
FinTech as a Financial Liberator
Shang-Jin WEI, N.T. Wang Professor of Chinese Business and Economy and Professor of Finance and Economics, Graduate School of Business and School of International and Public Affairs, Columbia University and Senior Fellow of ABFER
Discussant: Yiping HUANG, Sinar Mas Chair Professor of Finance of Economics, Deputy Dean of the National School of Development, and Director of the Institute of Digital Finance, Peking University