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Internet Finance

Network security risk perception and asset pricing of Internet finance

ZENG Jianguang

Economic Research Journal,2015,Vol 50,No. 07

【Abstract】 With the rapid development of Internet finance, more and more Internet users with a little money pay more and more attention to the risk that the money would be stolen away, because Internet would facilitate matters if an ill-disposed hacker looks for and discovers a vulnerability in the security mechanism that allows him to break through the authentication, or he is able to exploit some unknown limitations of the security mechanism without the need to know the required users' authentication information. These consist of the investors, perceived network security risks. This attention reflects the status quo of investors, perceived network security risks. This paper investigates whether the investors' perceived network security risks to Yu'e Bao have an effect on the return of Internet finance. We find that more attention paid to perceived network security risk significantly increase the risk compensation, and more attention from mobile Internet is significantly able to increase the more risk compensation.

Business model innovation in the Internet era: from the perspective of value creation

LUO Min;LI Liangyu

China Industrial Economics,2015,No. 01

【Abstract】 The production orientated business model used in industrial period is fading away, the demand-oriented business model used in Internet era and the logic behind value creation is growing since the internet era coming. In view of this situation, the article describes the concept of the internet era business model and describe the key elements, such as community, platform,cross-border,resource aggregation and product design. The main isolation mechanism of business model has been changed from technology development to community platform.From the discussion, the article proposal is that the business logic is the platform model under community logic in internet era. Based on this model, and from value creation perspective, the authors also try to figure out the difference between industrial period and internet era about tool, method and logic of value creation.Finally, from rent perspective,the paper analyses the driving force of business model and points out the transformation about several sort of enterprise economic rents(Penrosian rent,Ricardian rent, Schumpeterian rent), and point out the important of linkage. The article point out the linkage meet custom's deeper needs and which reveals the purpose of business model in internet era is chasing for linkage dividend.

Rise of the Internet finance as shadow banking and its shock: Why is China significantly different from the U.S.?

WANG Da

Northeast Asia Forum,2014,Vol 23,No. 04

【Abstract】 As an important part of shadow banking, the Internet finance achieved “blowout” development in China during 2013. Its features and patterns in China are distinct from that in the United States. Combining traditional finance with the Internet technology and the spirit of the Internet, the emerging Internet finance has far exceeded traditional financial business in terms of development as well as showing strong dynamics and innovativeness. Seven patterns of the Internet finance can be identified in China, with unique factors contributing to their emergence and rapid development. The rise of the Internet finance will significantly impact on the existing competition structure of China’s financial sector, the development of financial market, traditional financial business form and the system integration of the whole financial industry, and will challenge the existing oversight and regulation framework. Given that the understandings of the Internet finance and relevant studies are still inadequate in China’s current academia and business circles, research on it is imperative.

A critique of Internet finance

WANG Guogang;ZHANG Yang

Finance & Trade Economics,2015,No. 01

【Abstract】 Since 2012, accompanied with the hot topic of Internet finance substituting traditional finance, China’s Internet finance has entered the period of high speed development and some local governments have even selected it as the key project. This paper holds the opinion that there exists obvious limitation in the concept of Internet finance, and it is impossible for Internet finance to substitute traditional finance functionally. Internet finance mainly makes use of the flaw in China’s finance system for regulatory arbitrage. Internet finance can be a supplement, but cannot become the main operating model of finance. In the boom of Internet finance, it is important to avoid a new round of financial bubbles.

Impact of internet finance on the effectiveness of monetary policy: an economic analysis based on the framework of microeconomics of banking

LIU Lanbiao;QI Yanlong;ZHANG Jingjia

Finance & Trade Economics,2016,Vol 37,No. 01

【Abstract】 By introducing the impact of internet finance on residents’ asset selection and deposit supply into the theoretical framework of microeconomics of banking, this paper theoretically analyzes the impact of internet finance on the conduction effectiveness of price-based and quantitative monetary policy. The results show that the development of internet finance increases the sensitivity of bank deposit and loan scale and interest rates to interbank offered rate, and improves the effectiveness of the price-based monetary policy. The development of internet finance enhances the fluctuation of narrow monetary multiplier, increases the supply of broad money and reduces the velocity of money circulation. Meanwhile, with the data collected from internet finance, the People’s Bank of China (PBOC) and interbank market, this paper empirically analyzes the effect of internet finance on the effectiveness of monetary policy, and the results support the key conclusions obtained from the theoretical model.

Research on the measurement of development of Internet finance in China: based on the theory of financial function

YANG Shenggang ;LIU Shuwen;YANG Yang

Financial Economics Research,2016,Vol 31,No. 04

【Abstract】 Based on the theory of financial function, this paper constructs an index system that reflects the development of Internet finance from four aspects, including modes of payment, resource allocation, information process and risk control. Then according to the degree of order and synergy degree model, this paper carries out a comprehensive estimate for China’s Internet financial development level from 2007 to 2014. The results show that the improvement of the degree of order and synergy degree of the modes of payment, resource allocation and information process promotes the development of Internet finance, while the risk control shows a trend of decrease at the beginning and then increase later. Low synergy degree is the key factor leading to a slow rise then an explosive growth for Internet finance. Therefore, to promote Internet financial development, we should take into consideration of both the degree of order and synergy degree, especially controlling and decentralizing the financial risks.

Research on the influence of Internet finance on commercial banks’ risk taking

LIU Zhonglu

Finance & Trade Economics,2016,Vol 37,No. 04

【Abstract】 This paper analyzes the mechanism of Internet finance’s impact on commercial banks’ risk taking from four dimensions: risk management, operation efficiency, profitability and risk contagion. Using the data of 143 Chinese commercial banks from 2003 to 2014, this paper tests the impact of Internet finance development on commercial banks’ risk-taking. The results show that the rapid development of Internet finance improves the commercial banks’ risk management and operating efficiency, compensates for its adverse impact on profit and risk while reducing the risk of bankruptcy of commercial banks and promoting the stability of the entire financial system. The effects of Internet finance on different types of commercial banks are different. The risk-taking of joint-stock commercial banks gets reduced while the risk-taking of large commercial banks, city commercial banks and rural commercial banks is increased. The bankruptcy risk of city commercial banks gets increased mostly. Therefore, commercial banks need to promote the entire financial system stability by making use of Internet finance in a reasonable way based on the natures of commercial banks.

How far is Internet finance from farmers? Analysis of farmers’ Internet financial exclusion and its influencing factors in underdeveloped areas

HE Jing;TIAN Yaqun;LIU Tian;LI Qinghai

Finance & Trade Economics,2017,Vol 38,No. 11

【Abstract】 This paper studied whether the fast-growing Internet finance could alleviate farmers’ financial exclusion. Using thousands of sample survey data, this paper constructed rural Internet financial exclusion indicators from the three aspects of savings, credit and payment to identify the factors that affect the different aspects of farmers’ Internet financial exclusion. The conclusion shows that most farmers have relatively serious Internet financial exclusion, and Internet savings exclusion and Internet credit exclusion are the most serious, followed by Internet payment exclusion. The main reason for Internet exclusion is not facility exclusion and condition exclusion, but self-exclusion. The main factors that lead to self-exclusion include farmers’ gender, age, family income, education level, time taken to reach the nearest bank outlet, and whether farmers shop or sell online. Additionally, the paper studied the connection between traditional credit and Internet credit, and the conclusion shows that there is a competitive relationship between the two, and farmers that are excluded from traditional credit are also more vulnerable to Internet credit exclusion.

Research on the regional differences decomposition and convergence mechanism of development of Internet finance of eight urban agglomerations in China

LIU Chuanming;WANG Huitong;WEI Xiaomin

The Journal of Quantitative & Technical Economics,2017,Vol 34,No. 08

【Abstract】 Research objectives: this paper is to reveal the regional development disparity and its convergence mechanism of the Internet finance between eight urban agglomerations including Yangtze River Delta, Pearl River Delta, Beijing-Tianjin-Hebei urban agglomeration, Central Plains urban agglomeration, Middle Reaches of the Yangtze River megalopolises, Harbin-Changchun megalopolises, Chengdu-Chongqing megalopolises, and North Bay megalopolises. Research methods: based on the monthly data (from March 2014 to December 2015) of index of development of Internet finance released by Ant Financial Database, this paper uses the Gini coefficient and decomposition method proposed by Dagum to decompose the regional gap of eight urban agglomerations in the development of internet finance; based on spatial panel data regression model, this paper tests the σ-Convergence, β-Convergence and Club-Convergence. Research findings: from March 2014 to December 2015, the overall regional development of Internet finance of eight urban agglomerations shows a declining trend; difference within the Pearl River Delta urban agglomeration is the biggest; the differences between regions is the main source of gap in Internet finance; development of Internet finance shows a typical σ-Convergence. Research innovations: to reveal the source of the regional differences in the development of Internet finance in eight urban agglomerations, and to empirically test the σ-Convergence, β-Convergence and Club-Convergence. Research value: to narrow the regional differences in the development of Internet finance, and promote the coordinated development of Internet finance in different urban agglomerations.

Social characteristics and regulatory innovation of Internet financial risks

XU Duoqi

Chinese Journal of Law,2018,Vol 40,No. 05

【Abstract】 The application of social network analysis method to risk analysis of Internet finance reveals two social characteristics of Internet financial risks. Firstly, the connection density between multiple nodes has the dual role of decentralizing and reducing financial risks as well as aggravating the accumulation and spread of financial risks. Secondly, the formation and social amplification of Internet financial risks are constrained by the “embedded relationship network.” The financial relationship network established by the Internet leads not only to the complexity, abruptness, rapidness, and extensiveness of the spread of systemic risks of Internet finance, but also to such new forms of expression as “too many connections to collapse” and “too fast to collapse.” With the gradual manifestation of the risks and social characteristics of China’s new Internet finance industry in its development in the past two decades, the supervisory authorities have responded by stages with three supervisory methods:, namely, “inclusive regulation,” “regulation in principle” and “campaign-style regulation.” The recent supervisory failures have made it clearly that, due to the lack of appropriate data and technology, traditional divided financial regulation system, also known as “One Bank, Three Commissions,” falls far short of curbing the rampant growth of illegal Internet finance and preventing the accumulation and spread of financial risks. As a remedy, a new regulation system of Internet finance with advanced supervisory ideas, coordinated and data-sharing supervisory subjects, supervisory principles matching underlying risks, and a RegTech arsenal has been proposed. The ongoing reform of the financial supervisory system in China is a big step in the right direction, and RegTech is the most important basis of regulation system of Internet finance.

Is financial knowledge important to Internet financial participation?

YIN Zhichao;QIU Hua

Finance & Trade Economics,2019,Vol 40,No. 06

【Abstract】 With the development of Internet finance, opportunities and challenges coexist, so do returns and risks. As a vital factor affecting individual financial behaviors and decisions, will financial knowledge affect people’s Internet financial participation? Which kind of people are more likely to participate in the Internet financial market? Do the participants in Internet finance make windfall profits or in vain? Against the background of the rapid development of Internet finance, the answers to these questions are crucial. Based on the data of China Household Finance Survey in 2017, we empirically validated the influence of financial knowledge on Internet financial participation. The results show that financial knowledge has a significant role in promoting Internet financial participation. In terms of groups, financial knowledge has a stronger impact on the young, middle-aged, male and middle-class groups. For those who have received higher education or work in the financial industry, financial knowledge significantly promotes the Internet financial participation. Furthermore, we concluded that financial knowledge promoted participation in online wealth management, but had no obvious influence on obtaining investment returns. Therefore, in order to reduce the risk of Internet finance and promote its healthy development, China should pay more attention to individual investors and popularize financial knowledge, so that investors will make rational decisions.

Development of Internet finance and bank lending channel transmission of monetary policy

ZHAN Minghua;ZHANG Chengrui;SHEN Juan

Economic Research Journal,2018,Vol 53,No. 04

【Abstract】 Financial structure is the medium of monetary policy transmission, so monetary policy transmission changes with variations in financial structure. Recently, Internet finance has grown rapidly in China. The scale and growth speed of Internet finance in China is the largest and fastest in the world. According to iResearch (2017) , there are 500 million users of Chinese Internet banking and 200 million users of the lending network. Undoubtedly, Internet finance is a large shock to China’s financial structure that will significantly influence monetary policy transmission. This paper asked how Internet finance influences the bank lending channel of China’s monetary policy transmission. There are two reasons to care about this question. First, unlike in developed countries, China’s financial sector is still in the process of full liberalization. Until 2016, bank loans accounted for 69.86% of total social financing, so the bank lending channel plays an important role in China’s monetary policy transmission. Second, the relationship between Internet finance and the bank lending channel is ambiguous. Internet finance may reduce financial frictions, weakening the transmission effects. However, Internet finance would not affect bank credit transmission if there were no substitution between Internet finance assets and bank credit. Therefore, further research into the relationship between Internet finance and the bank lending channel is needed. In this paper, we built a general equilibrium model that includes representative economic agents and put forward four hypotheses about how Internet finance can influence the bank lending channel. We then empirically tested these four hypotheses. The main empirical technology of this paper is the generalized method of moments /dynamic panel data (GMM/DPD). This method allows us to resolve the problem of endogeneity and improves the validity of the estimates. Our data include variables on bank loans, monetary policy, Internet finance, financial frictions, shadow banking and bank size. Most of the macro and micro variables are available from Wind. The data on Internet finance mainly come from open network resources like iResearch and ERI. Missing values are completed with the moving average method. Our analysis leads to the following conclusions. First, the empirical results prove that Internet finance weakens the bank lending channel of monetary policy transmission by reducing frictions in the financial market. Second, through the optimal finance decision strategies of households, enterprises and commercial banks, Internet finance influences the monetary policy lending channel. There are four effects in this process: a bank debt structure effect, a liquidity effect in securities markets, an effect resulting from the mismatch of financial resources and a corporate finance structure optimization effect. Third, the empirical results support there being significant effects of bank debt structure on the bank lending channel. Initial findings of no significance are due to the limited scale of securities markets in China and the effect resulting from the mismatch of financial resources offsetting the financing structure optimization effect. The policy implications of this research are that the implementation of monetary policy should be sensitive to the structure of financial markets and that more attention should be paid to the “catfish effects” to traditional financial institutions caused by Internet finance.

Internet finance and bank risk-taking: evidence from the Chinese banking sector

GU Haifeng ;YANG Lixiang

The Journal of World Economy,2018,Vol 41,No. 10

【Abstract】 This paper studies the relationship between Internet finance and bank risk-taking with annual panel data from 107 Chinese banks from 2007 to 2016. The results indicate the following findings. Internet finance has a marginally increasing single-threshold effect on bank risk-taking, and bank risk-taking becomes more sensitive to Internet finance shocks as the bank capital adequacy ratio increases. The specific functions of Internet finance differ in terms of the impacts on bank risk-taking. The information processing function of Internet finance has the greatest impact on bank risk-taking, followed by the resource allocation function and then the function of payment and clearing, while the impact of the risk management function and that of the resource allocation function do not show significant difference. Moreover, different types of monetary policies also vary greatly in terms of the control and regulation of bank risk-taking. In the case of tight monetary policies, quantity-based instruments have a promoting effect on bank risk-taking while price-based instruments have an inhibitory effect, with the former stronger than the latter. In addition, bank risk-taking has significant procyclicality, which makes it more likely to be driven by economic growth when the payment and clearing function of Internet finance dominates, and more likely to be influenced by monetary policies when the resource allocation function of Internet finance dominates.

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