Crossing the River by Feeling Stones : Exploring China's Effectiveness in Regulating Internet Finance

摸著石頭過河 : 探索中國互聯網金融的有效監管模式

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Original languageEnglish
Pages (from-to)127-139, 148
Journal / PublicationScience Technology and Law (Chinese-English Version)
Issue number1
Publication statusPublished - 2022


China's regulatory tolerance of financial innovations brought not only rapid growth and unprecedented development opportunities to the internet finance sector but also triggered unexpected financial risks and legal liabilities. In its first attempt to regulate internet finance, the Chinese government “crossed the river by feeling stones,” moving gradually toward intervention. However, the existing literature has not adequately investigated how internet finance enterprises have responded to tightening regulation. This paper evaluates the effectiveness of China's experimental regulatory approach to internet finance, drawing empirical evidence from the law enforcement and corporate innovation data of listed internet finance companies from 2012-2018. The difference-in-differences results indicate that the number of lawsuits and patent applications significantly increased with tightening regulations, indicating that the experimental legislative governance of internet finance has gradually been accepted and digested by the market. These regulations are enforced in judicial practice and stimulate healthy competition in patent applications.

Research Area(s)

  • internet finance, effective regulatory pattern, tightening regulation, empirical legal study, difference-in-differences