Роль государственного регулирования в развитии Интернет-рынка финансов (на примере Китая)

From the GDP data, it can be seen that since the 1980s, the Chinese economy has entered a period of rapid growth. Summarizing the course of development of the Chinese economy over the past four decades, public policies that have a positive impact on China’s economic growth include: 1. Opening Market; 2. Encouraging the development of private companies and developing the stock market; 3. Promoting international free trade and developing export-oriented Economy; 4. Developing the urbanization and promotion of real estate economic development; 5. Developing the infrastructure. Ports, Railways, Highways; 6. Development the Internet+[Huang Huang, 2015], Sharing Economy and Internet Finance[Zhang Xinhong, 2017; Yan Jian, 2017].
Since its appearance, the Internet has fully and deeply penetrated into and deeply changed various fields of the economic and social development, profoundly affecting and changing the business model in all areas. Just as it has profoundly affected retail, publishing, music and other industries, the Internet has also profoundly affected the financial industry[Eric K. Clemons, Lorin M. Hitt, Bin Gu, Matt E. Thatcher, Bruce W. Weber, 2002].
The vigorous development of Internet Finance has aroused the attention of Chinese governments at all levels and has also been clearly supported by governments at all levels[Feng Guo, 2016]. Meanwhile, the barbaric growth of Internet Finance has brought about an increasingly prominent problem of risk[Michael Klafft, 2008;]. Due to the combination of high-risk attributes of the financial industry and the Internet industry, Internet financial risks are spreading faster, with greater harm impacts and risk management more difficult[Harpreet Singh,Ram Gopal,Xinxin Li, 2008]. Once Internet financial risks occur, it will easily cause serious losses, affect the security and stability of the financial system, and strengthening the prevention and supervision of Internet Financial risks has become an objective requirement for the healthy development of the industry.
This paper selects the role of governmental regulation in the Internet financial market as a thesis research topic. Mainly explores the position and development trend of the role of government in the Internet financial market, and the related issues such as what principles the government should follow when formulating regulatory policies.
Firstly, I will study and analyze the definition and connotation, the development status and the risk of the Internet Finance in China. Secondly, I will focus on current situation of regulation system in China, such as the necessity of regulation, the general policies on the Internet Finance Market. Then I will discuss the role orientation and future trends of the Chinese government combined the international experience. Finally, I will propose suggestions based on the above analysis.

Literature Review. Many scholars have studied and analyzed the definition, characteristics, risks and regulation of Internet Finance. In the definition of Internet finance, Xie Ping and Zou Chuanwei (2012) first proposed the concept of Internet finance, and believed that the Internet financial model is different from commercial banks indirect financing and also different from the third type of financial financing model for direct financing in the capital market. Li Jizhun (2015) put forward the “grassroots” and universal benefits features of Internet Finance, which are low in cost, high in efficiency, and convenient in service. The core competitiveness lies in the function of relieving information asymmetry. Before that, researchers focused more on specific forms and models of Internet Finance, Andrew Verstein (2011) believes that technological innovation and financial innovation have made P2P network lending connect borrowers and investors in a way that was previously unimaginable, and analyzed the regulatory issues of P2P network lending. Eric C. Chaffee (2012) studied the regulation of P2P network lending after the Dodd-Frank ACT. was introduced.
The research of Internet financial supervision mainly focuses on the necessity of risk prevention and supervision, supervision principles, and regulatory systems. He Hong (2013) believes that Internet finance has risks in the four aspects of supervision, law, capital, and information. Xie Ping; Zou Chuanwei; Liu Haier (2014) believes that Internet Finance cannot adopt a laissez-faire regulatory philosophy because it is immature, and should promote development through supervision. Yin Haiyuan and Wang Panpan (2015) believe that with the rapid development of China’s Internet finance, there are defects such as the ambiguous legal status of operating platforms, widespread fraud, lagging legislation, inconsistent regulatory systems, and difficult regulatory efforts.
The research on market regulation mainly focuses on the characteristics of different regulatory systems and the impact of various systems on economic development. Scharpf (1997) believes that to understand regulation as a response to new policy issues, then we have the responsibility to determine the ability of different regulatory systems to actually solve problems. Robert J. Shiller (2013) believes that any new technology may increase the risk, and the regulatory authorities cannot be absent. Fan Xueyi (2008) believes that before deciding whether to intervene in the market, the government must first evaluate whether it can obtain more information on the market failure than the market itself, as well as the cost of collecting information and implementing market policies. She Yuan (2010) believes that the improvement of China’s market regulatory system should strengthen the self-discipline mechanism in market supervision. Liu Xianwei (2016) proposed the following policy recommendations: Integrate government supervision functions to strengthen market supervision, improve the management system, and strengthen supervision of monopoly industries.
In Chinese academia, the role of the government in Internet Finance market regulation has led to many discussions. Wang Lili(2016) believes that the government should actively intervene and impose strict supervision to guard against financial risks. Ma Haitao; Hao Xiaoyu; Sun Li (2016) believe that the government should pay close attention to and respond with low-key in order to ensure the development of the market. Li Wenhong (2017) believes that it should follow the principle of “technology neutrality” and insist on the supervision of the nature of financial services. Feng Qian and Wang Haijun (2017) believe that “penetrating” regulation should be implemented to plug regulatory loopholes and regulate arbitrage behavior.
There are many researches on Internet Finance in China, but few researches focus on the role of the government is in a dynamic change. This paper based on the analysis of the logic of the government’s role change analyze the future trends and make suggestions for the formulation of future regulatory policies.

Research methods. In the process of research and writing, this paper focuses on the comprehensive use of research methods, which focuses on the combination of qualitative analysis and quantitative analysis, and theoretical research and case analysis.
The first is the combination of qualitative analysis and quantitative analysis. Qualitative analysis emphasizes the use of textual language to describe the characteristics of things. Quantitative analysis emphasizes the characteristics of digital language to describe things. This paper focuses on qualitative analysis, supplemented by quantitative analysis. When it comes to proving issues related to Internet finance and Internet finance supervision, it first analyzes the concepts and problems, and then uses quantitative data to support the qualitative research conclusions. The arguments are well-founded.
The second is the combination of theoretical research and case studies. The purpose of theoretical research is to find the theoretical basis for the study of the article. The purpose of the case study is to make the study more convincing. Based on the existing theories, this paper studies the role of government supervision in the Internet financial market, and comprehensively applies theoretical knowledge such as financial supervision theory, public interest theory, and market failure theory to analyze and study the key issues involved in this paper. This article also summarizes the experience of Internet financial supervision through key case analysis.
1. Theoretical Foundations of a Governmental Role in Market
In all modern states, as the government has emerged as a active force in guiding social and economic development, functions of government have greatly expanded. In particular, the rise of modern capitalism and the prosperity of the market economy, on the one hand led to the growth of social wealth and the improvement of people’s material and living standards; on the other hand, they have brought new problems that the market itself can not solve, the so-called market failure. Therefore, the growth of economic wealth has prepared the material conditions for the government to fulfill its economic functions, and the emergence of various problems has provided the legitimacy justification for the government to intervene in the market [Sun Guanhong, 2008]. In countries with a command economy, the government has extensive responsibilities for many types of economic behavior. In countries those choose social democracy, the government owns or manages or regulates business and industry. Even in the free market economy like in United States, in most societies, there are still more rules than the government should just adjudicate on the competition of other social forces – some levels of government regulation, such as the use of credit controls to prevent economic fluctuations, are now accepted with relatively little question[Zhang Xu, 2014].
The relationship between the state and the market has three modes of laissez-faire, trade-off, and controlling [Jorge Bateira, 2012; José Reis, 2012]. In the laissez-faire model, the government seldom intervenes in the market [Rand. Ayn, 1967]. The government adopts a laissez-faire attitude towards market development [Dostaler. Gilles, 2007]. The problems that arise in the development of the market are determined by the market players themselves. In this model, the market itself is often unable to quickly and effectively form a solution to market loopholes, so that the development of the industry is easy to chaotic disorder [Barnett, Vincent, 2013]. This model is most effective only if the financial markets themselves are extremely effective [UK FSA, 2009]. In the trade-offs model, the government has limited involvement in market regulation, and market autonomy still has room for self-reliance [Gerald W. Scully, 2002]. Government regulations and market autonomy work together to pursue the healthy development of the industry. In this model, because the market loopholes are filled by government regulation, the industry development is more orderly. In the controlling model, the market rules are completely set by the government, and the space for market autonomy is almost zero. Whether the government can establish a complete market order is the only factor in the orderly development of the industry [Gerald W. Scully, 2002]. In this model, the government has unlimited power and responsibility, and the development of the industry is manifested in an orderly or relatively stagnant state due to the state of government power.

1.1. Market failure and State Intervention
Although many people think that “free markets” are naturally occurring, it is difficult to imagine them operating without some form of state. The shortcomings of market outcomes is the principal justification for state intervention. In the West, scholars often use the theory of market failure as a rationale for government activity. Market failure is a situation in which the allocation of goods and services is not efficient, often leading to a net social welfare loss. Market failures can be viewed as scenarios where individuals’ pursuit of pure self-interest leads to results that are not efficient – that can be improved upon from the societal point of view [John O. Ledyard, 2008]. The performance of market failure mainly includes the following;
1. Negative externalities. Externality refers to the negative or positive impact of the commercial activities of market actors on other subjects, consumers, and society as a whole. Because the market is rational “economic man” pursues the microscopic behavior logic, only considered in decision-making has a direct effect on its own interests of costs and benefits, without considering the costs and benefits of outside their own interests. Generally speaking, active external activities have some kind of “public welfare”, which is not the preference of rational economic people; Instead, rational economic people prefer activities that can pass costs on to others or to society [DeMartino, George, 2000]. The external phenomenon requires the government to intervene in the market, promote positive externalities, reduce negative externalities, and maintain the optimal state of social resource allocation.
2. Natural monopoly. The law of increasing competition is determined by the law of increasing remuneration. “Where economic activities are subject to increasing returns and decreasing marginal costs, markets will again fail to generate efficient outcomes. Under conditions of decreasing costs, the lowest cost mode of production would be achieved by a single producer. Consequently, a free market will result in monopoly.” When a certain area of a monopoly producer and supplier, is unable to reflect the advantages of competition, and occupy the monopolist development space and the possibility of enroach on consumer interests. Monopoly can also destroy the balance of resource allocation mechanism, make resource allocation inclined to monopolize, and the resource allocation of non-monopolists is insufficient. In addition, monopoly of monopoly on price and other information can also cause consumers’ loss of interest. Therefore, it is necessary for the government to control the monopoly to overcome the bad influence of monopoly.
3. Incomplete information, also called insufficient information or information asymmetry. Market theory assumes that the information of buyers and sellers is complete. If one party fails to obtain information, especially the buyer, the market cannot achieve the best. In the real market, information is incomplete due to the barriers in the market, the sensitivity of both parties, the technical ability of obtaining information and the imperfect information divergence mechanism. Information does not completely put the two parties in an unequal position, so that one party, especially the consumer, is at a disadvantage, resulting in unfair competition and market failure [Joseph E. Stiglitz, 1998]. Therefore, the protection of consumers and the unified information are the important reasons for the government to enhance the market function by providing information.
4. Unequal distribution. The function of the market to individual income distribution mainly depends on the law of value and the principle of supply and demand. This distribution system is of great significance in stimulating social enthusiasm and improving individual ability. However, depending on the market mechanism to adjust income distribution, the social income gap will be widened, and even polarization will deepen the unequal distribution of social wealth. Aiming at this phenomenon, the government of market income redistribution is especially important, and how to protect the interest of a few people at the same time also take care of the equality of the majority of people, is the important responsibility of modern government.
Based on the above analysis, it is believed that the government should properly intervene in the market to overcome market failure, mainly including:
• to develop public services and provide public services that private individuals are unwilling to provide.
• maintain market competition order, control the emergence of market monopoly, and protect the fair opportunity of each participant.
• improve the market information disclosure system and ensure the smooth and symmetric market information.
• ensure social fairness and maintain social stability. However, in the case of market failure, two things should be kept in mind: First, not all market failures can be fixed by the government; Second, the government’s intervention in the market will also lead to another new problem: the failure of the government. Therefore, the government and the market as two kinds of regulatory mechanisms is not an optional issue but one that is more or less. The key is to address the problems to be solved, regulating the weight of government and market in the hybrid regulation mechanism.
A national government’s intervention in the social and economic life, at least not entirely a matter of science, also by its political system and ideology, economic development level and the market economy foundation, under the rule of law, and the world situation, time trends such as the influence of various factors at home and abroad [Sun Guanhong, 2008].

1.2. Public Interest and Financial Regulation Theory
George Joseph Stigler (1971) proposed that the purpose of the regulation was “to protect the interests of producers”. Before that, the traditional view generally accepted by the economics community is that government regulation is to suppress the incompleteness of the market to protect the interests of the public, that is, the existence of public goods, externalities, natural monopolies, incomplete competition, uncertainty, and information asymmetry. In industries such as market failure, in order to correct the defects of market failures and protect the interests of the public, the government directly intervenes in the behavior of microeconomic entities in these industries so as to achieve the purpose of protecting the interests of the public.
According to this theory, under the above conditions, especially in the presence of natural monopoly and external conditions, unrestricted competition will undermine economic efficiency. The fundamental problem of the natural monopoly industry lies in the contradiction between configuration efficiency and production efficiency. The government’s price and access control can achieve unity of configuration efficiency and production efficiency. Because the admission control only allows one production to achieve production efficiency, price control limits the price to the social optimal price to meet the requirements of configuration efficiency [Misham, E. J, 1969]. When there are externalities and market failures, government regulation can improve social welfare.
The basic idea of the public interest theory is that the law should reflect “public opinion”, represent the entire people, or “the best interests of the overwhelming majority of the people.”
This theory is premised on the strict boundaries of the political realm (pursuit of public interest) and the economic market (pursuit of self-interest). It is rooted in methodological organicism (such as the super-people’s state, the mysterious “public interest”) and the assumption of altruism.
The operation of the financial industry is often accompanied by financial risks [Dewatripont, M. and J. Tirole, 2012]. Once the financial risk breaks through the critical point, it will evolve into a financial crisis, bringing disaster to people’s lives and social production. In order to prevent financial risks and financial crisis, ensure the stability of the financial order and the security of the financial system, the theory of financial regulation emerged and changed along with the development of financial regulation practices.
From the beginning of the 20th century to the 1930s, the central bank system was generally established in China. In the real sense, financial regulation began to appear, and the theory of financial regulation began to sprout. After the 1990s, the theory of financial regulation advocates both safety and efficiency[Wang Aijian, 2013]. The first is to focus on functional regulation and financial regulation from a functional perspective to better maintain the stability in the formulation and implementation of laws and regulations, and to better adapt to the needs of different countries and financial internationalization, and to reduce the possibility of regulatory arbitrage. The second is to focus on capital regulation, put forward the minimum capital adequacy requirements, implement the asset business restrictions of financial institutions, and avoid cross-infection and excessive competition in financial services. The third is to focus on market discipline regulation. The combination of government regulation and market constraints will improve government regulation efficiency. The fourth is to focus on incentives and regulation, linking the regulatory incentive scheme with the right to demand.
The theoretical basis of financial regulation mainly includes theory of financial risk [Bouchaud J. P., Potters M., 2000], social interest theory, investor interest protection theory and so on. According to the theory of financial risk, the financial industry is a special high-risk industry. There is a “domino effect” in the financial system. The risk of one link will result in a chain reaction of the entire financial system. Financial risks will directly affect the stability of the monetary system and macroeconomics [Laffont J J，Tirole J., 1993]. Therefore, it is necessary to supervise the financial industry. The social interest theory holds that the starting point of financial regulation is to safeguard the interests of the public; investor protection advocates create a fair and just investment environment for investors.