Peking University Publishes its “Internet Finance Development Index”

On December 20^th, 2015, the first Digital Finance development index in China – Peking University’s “Internet Finance Development Index” – was officially released. First, Professor Yiping Huang, director of PKU’s Institute of Digital Finance (IDF), released the “Peking Index”: a sneak-peak at the format of the main document.

 

Together with the Shanghai Finance Institute (SFI), a digital finance thinktank, and Ant Financial Services Group (AFSG), China’s authoritative digital finance corporation, the IDF put together the “Internet Finance Development Index” (hereafter, ‘the index’) to record and evaluate the trajectory of China’s digital finance industry. The index consists of data provided by AFSG’s vast databases and other digital finance corporations, and combines the academic and professional expertise of some of PKU’s brightest minds. By rearranging national indices by specific attributes, services, and regions, the index provides valuable insight of undoubtable service to the nation, in its drive to adapt to the digital era.

 

As a quantitative tool for measuring complex variations, the index boasts the following qualities:

 

First, it records the development of digital finance and aids industry professionals and investors understanding of affairs. Second, it offers references for relevant government supervision and policy making. Third, it provides local governments with an overview of local development, as well as more specific instruction through the regional index.

 

 What does the index include?

The index relies on a narrow definition of Digital Finance: those financial services developed by internet enterprises and based on internet technology.

 

The data needed comes from ASFG, Zhongan Insurance, Memeda Financial Services, Qufenqi, the People’s Bank of China, Zero-One Finance, amongst others. The project group divided digital finance services into six categories: internet payment, internet currency funds, internet credit, internet insurance, internet investment and wealth managemen.

 

According to the breadth and width indicator of each service, the research group composed one transaction development index and drafted the overall index reflecting the overall development of digital finance. Meanwhile, based on the relative ratio of different regions and attributes to the national development, the research group computed the region and attribute indexes. The results were as follows.

Digital finance develops rapidly while undergoing abrupt seasonal change: growth is slow during spring festival but peaks during the “Chinese Valentine’s Day” online shopping festival. Up until September 2015, the index for internet payment and internet currency funds shows growth to have lagged behind internet investment and insurance. Sex appears to have little influence on participation in digital finance, but different age groups differ greatly. Digital finance mostly relies on those generations born in the 80s and 90s. The digital finance development index appears to show close ties with macroeconomic indicators (for example, with the purchasing manager index in the manufacturing industry subcategory) and traditional finance measurements (with the social financing scale, for example). It has not developed independently from real economy, or completely deviated from the trajectory of traditional finance, but certainly seems to have benefited the finance industry as a whole. Before the stock market disaster in June 2015, the digital finance development index and A-shares circulation market value show consistent and similar growth. However, after the crash, A-shares market value dropped dramatically, while the digital finance development index – despite its rate of growth slightly diminishing – remained on a similar trajectory.

The IDF was founded by two PKU institutes, the Social Science Survey (ISSS) and Shanghai Finance Institutes (SFI), and by AFSG.

 

The ISSS is an interdisciplinary research platform on social problems and current affairs in China. It boasts internationally revered research methods, rich experience, and broad scope, undergoing nationwide research projects. CF40 and its sister institute, the SFI, is one of the leading financial think tanks in China; adundant in academic output and digital finance industry resources. Ant Financial Services Group boasts vast quantities of data, advanced cloud computing, and advanced data processing techniques – a key player in the industry.

 

On January 28th, 2015, these three institutions held a signing ceremony in the establishment of the IDF. On April 13th, after inspection by Peking University heads and the acquisition of PKU’s President’s Office’s approval, the Institute was officially launched. The IDR implements a Director Responsibility System in the leadership of its council, which is led by representatives from the three founding parties. As an open research platform, the council will aim to enlist other digital finance institutions in the future.

 

 CEO of AFSG Jing Xiandong said that the development of Internet finance warranted an index tool to reflect the overall development of the industry. Because of this, AFSG and the SFI called for the establishment of the IDF to draw up the index.

 

Internet finance indices will serve as a barometer by which the progress of China’s Internet finance industry can be measured; something of great service to the government, finance industry, and ultimately, society itself. Firstly, it provides decision-making references for the government. Regulatory institutions within the industry can use the index to gauge overall development, and adopt appropriate regulatory policies to aid the industry’s healthy growth. Local governments will also be aided by the index, and will be able to draw on the experience of other regions. Secondly, it provides decision-making references for private enterprises. Internet finance enterprises can evaluate the overall development of the industry according to the index in order to make better operational decisions. Finally, the Index aid the public’s understanding of  the industry, which will strengthen consumers’ trust.

 

 CSO of AFSG Chen Long commented on the content of the report. He said that China's "Internet Plus Retail" pattern has turned a corner, and the combination of Internet payment and consumption scenes has developed rapidly. The shopping season in China has caused global concern and discussion. Credit reporting and Internet finance are the next priorities for China's future financial development. The importance of Internet finance index is difficult to ignore, because it can play a strong role in data support for the central government, local governments, enterprises, researchers and various industries. The index can also be expanded to other industries over time. In the second half of the conference, the panel discussed the report and answered questions from press reporters at the scene.

 

The press conference was chaired by Wang Haiming, Executive Deputy Director of the IIF. The distinguished guests in attendance included members of CF40: Managing Director of CITIC Securities Gao Zhanjun, General Manager of the Strategic Development Department of Shanghai Pudong Development Bank Li Lin, Chairman of ARON Capital Management Zhang Jialin; CF40 governing unit representatives: Vice President of AFSG Jason Lu, Deputy Director of the Finance Research Institute of the Bank of China Zong Liang; friends of the CF40: CEO of 01Caijing Bo Liang, Founding Partner of Lingfeng Capital Ma Ning, Deputy Director of the Financial Informatization Institute Shen Yifei, Vice General Manager of the Internet Finance Department of Industrial Securities Wang Weiqiang, CEO of Letv Finance Wang Yongli, special adviser to the China Banking Regulatory Commission and former President of The Industrial and Commercial Bank of China Yang Kaisheng, Director of the Big Data Center of Tianhong Asset Management Zhou Weiguo; and members of the research group: Guo Feng, Kong Tao, Shao Genfu and Wang Fang.