China central banker calls for crackdown on unlicensed online financial firms

SHANGHAI (Reuters) – A senior Chinese central banker called on Tuesday for a crackdown on brokerages and banks doing online business in mainland China without local licences.

Sun Tianqi, head of the Financial Stability Department of the People’s Bank of China (PBOC), said in an article published on Tuesday that some online brokerages “are driving without a driver’s licence in China, and are suspected of engaging in illegal financial activities”.

China must “mete out heavy penalties against illegal financial activities, and strictly pursue criminal and civil responsibility,” Sun wrote in China Finance, a PBOC publication.

Sources told Reuters in December that Chinese officials were planning to ban online brokerages from offering offshore trading services to mainland clients, extending a broad regulatory crackdown on a range of sectors.

In Sun’s article, which focuses on the boundaries of financial services in a digital economy, regulators appear to be targeting more types of institutions.

Sun said some overseas units of Chinese brokerages open accounts for mainland clients via the internet, and partner with offshore banks to facilitate cross-border money transfers.

“Such a business model is beguiling … but should also be deemed illegal activities,” he said, adding that some cross-border payment companies do not have licences in China, but attract e-commerce clients online.

“Financial licenses have national boundaries,” Sun wrote.

Opening China’s financial sector is inevitable, “but overseas institutions operating business in China must abide by local regulatory rules,” he added.

(Reporting by Shanghai Newsroom; Editing by Alexander Smith)