(Yicai Global) Dec. 23 -- China's version of the United Kingdom's 'regulatory sandbox' differs from the original in that it only accepts applicants with financial business licenses, Economic Information Daily cited an official at the Chinese central bank as saying.

The UK's supervision mechanism mostly targets fintech companies and allows non-licensed institutions to participate and pick up a license after testing in the sandbox, Li Wei, director of the Science and Technology Department of the People's Bank of China, said at the 2019 China Financial Forum Annual Conference on Dec. 21.

But in China companies must be licensed institutions whose products will follow regular financial sector rules when entering the market, rather than special innovative fintech rules, he added.

The UK's Financial Conduct Authority pioneered the regulatory sandbox model in 2015. It encourages fintech startups to test their business models in a real or simulated market environment, while providing feedback for the regulator to adjust its rules and limiting the risk to consumers.

Fintech innovation is becoming increasingly common, but there are hidden risks, Li added, saying the Chinese sandbox aims to use innovative regulatory tools to standardize and guide fintech innovation rather than just encourage it.

China has brought in social supervision and self-regulation based on its 'industry supervision + institutional self-governance' model to conduct full-life cycle supervision of fintech applications, Li continued.

The PBOC began piloting regulations on fintech innovation earlier this month, picking Beijing as the first city to experiment with the sandbox.

Editor: James Boynton