Background of Dr Zheng Lei
Dr Zheng is behavioral economist, innovation development and financial investment Specialist in
China. Ph.D. in Economics in Nankai University, MBA in Maastricht School of Management of
Netherlands, Bachelor of Mathematics in Lanzhou University. Dr Zheng was the executive
director in CMB International Capital previously.
Question1
Han: Please tell us about your background related to Fintech.
Dr Zheng: I have left CMB International last year. I have collaborated with Gernman Fintech lab
and exchanged ideas regarding global Fintech development as well as blockchain business
application scenario particularly, both in China and all over the world. We have collectively
published a book regarding blockchain in such case. Apart from that, I have worked on business
application, future development and management issues relating to big data and artificial
intelligence (AI) as well. Furthermore, the great bay area (GBA) including cities of Dongguan,
Zhuhai, Guangzhou, Shenzhen and Hong Kong with Fintech aspirations and attractive Fintech
infrastructure has become a key area for Fintech development in China. Shenzhen, being a Fintech
pilot city, becomes the leader of GBA. Thus, both Shenzhen government and Shenzhen financial
authority co-lead in developing Fintech in GBA. I am thus appointed by the government to be
responsible for training Fintech talents. The training system by designing courses and textbooks
evolves continuously with the speedy changing industry environment, courses setting from
beginner’s level to expert industrial level. There are some examples in the textbook to discuss
issues such as ethical issues encountered by evolutionary technology; bottleneck of technological
development; personal privacy and to what extent can technology apply to business scenarios, for
example, whether human identification should be collected? Is it legal to do so? I will further
explore the area of each ABCD+I in terms of AI, blockchain, cloud computing, big data, and IOT,
to think of each business application. There are also some technologically inter-connected
business scenarios.
Question 2
Han: In your opinion, which areas of China's Fintech innovation are currently over-hyped, and
which areas are worthy of attention?
Dr Zheng: For country like China, as the overall population size is large, when people start doing
something, it can be hot topics very easily. Previously, blockchain seems over-hyped, but now it
cools down. As nowadays, Chinese government is promoting the ideas of ‘AI plus’ and “AI+Big
data’. After a period of time, it will reach an outbreak point. However, we cannot ignore the
progress, as there are more business applications using other technologies instead of blockchain
itself only. They will then transform into industrialization. The duration of transformation may
take approximately 3-5 years. At the same time, blockchain may take longer time, saying around 5
years to decide which part of technology and business application can be integrated to put into
industrialization.
I believe that China has a strong foundation to develop Fintech in depth. There are some voices in
the market stating that machine learning has reached bottleneck of its development. I personally
not agree with such statement, as machine learning has not reached its business application stage
in financial industry yet, thus, it may have a huge development potential in the future.
Question 3
Han: Please talk about the important attributes to China's Fintech ecosystem construction, and
what do you think China's current Fintech development opportunities and challenges? Which
factor do you think has the greatest impact on the development of China's Fintech industry?
Dr Zheng: In terms of political factors, the prime minister has recently raised the idea of ‘AI plus’
instead of previous ‘Internet plus’, by reinforcing the application of AI technology in different
industries such as manufacturing and now financial industry, as there is a huge market potential of
applying AI technology in various industries. The government has shown strong support in
developing AI and its application in different industries with close monitoring as well, avoiding
the same situation happening on P2P application previously, which resulting in huge economic
loss. Being as a intelligent government, it will act as a general guide and keep the openness and
safety of information. At the same time, it also insists its firm attitude in certain specific issues
relating to Fintech. For example, the issuance and transaction of cryptocurrency in China. The
reason is that there’s no absolute decentralization but a form of alliance chain. The People's Bank
of China will lead the digitization of the Chinese yuan, others will not able to create any form of
digital currency for transaction purposes in China.
In terms of regulations, the business development and regulation of Fintech co-exist. The two
aspects always develop together and affect each other. Thus, it will be a challenge in terms of
Fintech ecosystem development as it is a process of game playing.
In terms of talent availability, it is not only an issue of Fintech ecosystem development factor, but
other technological innovation growth factor. Furthermore, it is not a challenge for China only, but
a global one, even for US, which has the most advanced technology research base. China can only
think of ways to train and nurture its talents, for example, open Fintech relevant department and
courses in higher education institutions in China. Furthermore, the government has also
emphasized the professionalization of higher education, such as higher vocational technology
education. Besides gap of basic technology research between countries such as US and China, the
technology business application in financial industry is not much. However, the Fintech business
application cannot be isolated from the technologies themselves. The foundation of technology
research is the major engine of future Fintech development. Otherwise, it cannot run fast.
Therefore, China has to strengthen its research ability in technology and increase its technology
capability and expertise.
In terms of overall social environment for Fintech development, the public awareness of Fintech
development is high. However, due to lack of expertise and capability, firms and companies are
not clear about what business application and which technology should be used and integrated.
Question 4
Han: What do you think is the development direction of China financial industry? Who might be
the winner?
Dr Zheng: Financial industry is sophisticated. There are always potential risks and issues in its
development process. For example, when Facebook issues Libra, the US government also feels the
threat in controlling its currency. Thus, financially industry needs to set up certain threshold. The
financial industry is generally open. However, it may threaten the country in certain extent. It
cannot be so open and at the same time, such technology will not be banned. It is thus very critical
for government to take the control. It is just an evolution process.
In China, during the economic downturn, the most stressful industry is the financial industry.
Certain issues must be solved such as adopting financial de-leverage. We cannot hide the ‘bomb’,
otherwise it will break out one day. It is important to solve the current issues firstly before
investing in new ideas. Innovation itself is not the key point, as innovation always accompanying
risks and uncertainties, which may explode one day.
Although traditional financial institutions are taking initiatives in continuous innovation, they
cannot surpass supervision from the regulations. They can only adopt changes in controllable
scope, and make the changes integrating into existing systems. From the other side, big tech giants
and other tech companies cannot take the lead in financial industry at any point of time, as
financial industry has high barrier to enter and regulatory body will not open the right to
technology companies. What tech giants and technology companies can do is to assist bank and
other financial institutions’ in their technology development and upgrading.
Question 5
Han: How do you think Fintech startups here in the UK can enter China's Fintech market? How
can they collaborate with China Fintech market players?
Dr Zheng: It is normally very hard for different financial industries to merge and combine. This is
mainly due to different systems and regulations in different markets. For same technology,
different business application will be adopted in different markets. For example, although there
are Chinese banks opening UK branches, hoping to work with UK local Fintech firms to excel
their technology capability, it is very hard to do so. This is because of the legacy system from its
head office. The branches cannot own separate systems, as they will affect the overall system
stability for the bank overall.
Thus, one possibility of collaboration between the two markets will be that technology companies
in UK divesting its existing business application in UK local market, using its technology
advancement in expertise to work with China’s local Fintech companies or traditional financial
institutions to work out the customized solution in applying the technology in certain business
scenarios in China. The communication and exchange of ideas in the overall collaboration will be
the key to success.
Initiated by Angelia Han.