China has made significant progress towards financial inclusion in the recent past, owing to conducive regulations, innovation, and strengthening of the banking sector. Guided by China Banking Regulatory Commission and People’s Bank of China, Village and township banks and other providers in remote regions have taken initiatives in agency banking to enable access for rural low-income customers. Private sector innovations continue to drive a noticeable shift towards digital financial services in China.
China is home to four of the world’s largest fintech ‘unicorns’. Fintech activity is on the rise in online lending, digital payments, insurance, and personal wealth management. Highly efficient and lower-cost P2P lending platforms are also addressing the significant gap in the SME sector. However, it is estimated that significantly larger number of people are underbanked. Internal migrants, usually low income, are at a particular disadvantage due to the strict residential registration system in China that prevents them from settling in cities and accessing financial services.
The banking sector has been undergoing significant reforms to accelerate the access to and use of formal financial services, particularly for the under-banked population. Technology-driven and innovative solutions are expected to emerge, which will further augment meaningful financial inclusion in the country and facilitate the integration of underserved segments into the formal financial services sector.