Rapid growth of Internet finance has had a significant impact on the traditional banking sector, a development which has aroused great interest.

The 2014 China Financial Stability Report released by the People’s Bank of China highlights the subject of Internet finance.

The report says that the development of Internet finance has five positive aspects. Firstly, it promotes a type of finance that benefits all, and which plugs gaps in traditional financial services. It also makes better use of private capital and facilitates better management of such capital. By satisfying the needs of e-commerce, Internet finance helps to drive consumption. It also reduces the cost of and improves the efficiency of both capital allocation and the quality of financial products. A fifth benefit is that it drives innovation in financial products and satisfies the evolving demands of consumers.

Meanwhile, the report specifies five principles for supervising Internet finance: Innovation in Internet finance should serve the real economy, comply with macroeconomic regulatory and financial stability, protect customers’ legitimate rights, and maintain fair competition and self-regulation in the market.

According to Chinese experts, defining such principles will help to promote sound, sustainable and stable development of the Internet finance industry. It will also facilitate the development of a multi-level financial system that offers better service to the real economy.

The article is edited and translated from 网络金融让银行出一身冷汗 Source:People's Daily Overseas Edition, Author: Zhao Pengfei