Fangda Partners acted as sole legal counsel when HSBC Group opened China’s first wholly foreign-owned fintech company, HSBC Fintech Services (Shanghai), on 9 January.
The company, based in Lingang New Area of the Shanghai Free Trade Zone, will offer technology and data services for the bank’s mobile-based financial planning offering, HSBC Pinnacle Venture.
China’s fintech market has been growing fast, and the introduction of regulations on online microfinance business and internet loans last year has made companies reconsider the risks.
Ren Zhiyi, a partner in Fangda’s Shanghai office, told China Business Law Journal that he was optimistic about the overall regulatory environment in the industry, but “there should be a distinction between the concept of fintech and internet financing, and fintech shouldn’t be simply equated with the peer-to-peer (P2P) model and equity crowdfunding”.
Ren said fintech focused more on the technical side in supporting financial businesses, and its application should still follow financial industry rules and comply with relevant laws and regulations.
The successful establishment of HSBC Fintech is closely related to the launch of a regulatory sandbox for fintech startups in Shanghai, in May 2019. In addition to HSBC, the Bank of Communications successfully registered its fintech company in Lingang.
For foreign companies interested in opening fintech subsidiaries, Ren suggested: “Firstly, the companies should think clearly about the application scenarios that correspond to different regulatory policies in different areas.
“Secondly, companies should determine the location as early as possible, so lawyers can speed up completion of the project based on local regulations and favourable policies.”