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Fintech and Financial Risks of Systemically Important Commercial Banks in China: An Inverted U-Shaped Relationship

Author

Listed:
  • Baomin Chen

    (School of Business, Nanjing University, Nanjing 210093, China)

  • Xinyun Yang

    (School of Business, Nanjing University, Nanjing 210093, China)

  • Zhenzhong Ma

    (School of Business, Nanjing Audit University, Nanjing 210017, China
    Odette School of Business, University of Windsor, Windsor, ON N9B 3P4, Canada)

Abstract

The past decade has seen impressive developments in financial technology (FinTech) in China. As a new technology and innovative method that competes with, and also supplements, traditional financial methods, fintech has had a significant impact on traditional financial businesses and has thus challenged the role of commercial banks as credit intermediaries in the financial sector. This paper examines the potential risks that fintech brings to commercial banks in China, and collects data from 19 systemically important banks from 2011–2020 to analyze the effect of fintech development on commercial banks’ financial risks in order to achieve sustainable development in the financial sector. Using the Z value and non-performing loan ratio as the criterion variables, this study shows that the impact of fintech on the financial risks of systemically important banks demonstrates an inverted U-shaped pattern, with the financial risk increasing first and then decreasing alongside the further development of fintech. The results also show that commercial banks’ responses to fintech development has been comparatively slow. Managerial suggestions are then discussed on risk supervision for commercial banks and the financial sector in China and other emerging markets.

Suggested Citation

  • Baomin Chen & Xinyun Yang & Zhenzhong Ma, 2022. "Fintech and Financial Risks of Systemically Important Commercial Banks in China: An Inverted U-Shaped Relationship," Sustainability, MDPI, vol. 14(10), pages 1-20, May.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:10:p:5912-:d:814795
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    References listed on IDEAS

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    Cited by:

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    2. Zhang, Yujin & Ye, Shujun & Liu, Jie & Du, Lihong, 2023. "Impact of the development of FinTech by commercial banks on bank credit risk," Finance Research Letters, Elsevier, vol. 55(PA).
    3. Pejman Peykani & Mostafa Sargolzaei & Negin Sanadgol & Amir Takaloo & Hamidreza Kamyabfar, 2023. "The application of structural and machine learning models to predict the default risk of listed companies in the Iranian capital market," PLOS ONE, Public Library of Science, vol. 18(11), pages 1-24, November.
    4. Niu, Juanjuan & He, Jun & He, Yiqun, 2024. "Harnessing FinTech for sustainable mineral development with innovative financing strategies in China," Resources Policy, Elsevier, vol. 90(C).
    5. Yang Liu & Aisyah Abdul Rahman & Syajarul Imna Mohd Amin & Roslan Ja’afar, 2025. "Navigating fintech and banking risks: insights from a systematic literature review," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-16, December.
    6. Areej Hijazin & Nemer Badwan, 2026. "The Impact of Financial Technology Development (FinTech) on the Profitability of Conventional and Islamic Banks Listed on the Palestine Stock Exchange," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 17(1), pages 138-168, February.
    7. Mandella Osei‐Assibey Bonsu & Ying Wang & Princess Rejoice Dankwa Nartey & Margaret Nana Amala, 2025. "Does the Integration of Fintech and Green Finance Enhance Sustainability Performance in the Banking Sector? Information Technology Governance as Moderator," Business Strategy and the Environment, Wiley Blackwell, vol. 34(8), pages 9954-9977, December.
    8. Tarekegn Tariku Ebissa & Deresse Mersha Lakew, 2025. "Cost efficiency of commercial banks in Ethiopia: Does financial technology matter?," PLOS ONE, Public Library of Science, vol. 20(1), pages 1-18, January.
    9. Wang, Nan & Wang, Liya & Ma, Zhenzhong & Wang, Shouyang, 2022. "From knowledge seeking to knowledge contribution: A social capital perspective on knowledge sharing behaviors in online Q&A communities," Technological Forecasting and Social Change, Elsevier, vol. 182(C).
    10. Changzheng Zhang & Yuchao Wang & Yanbing Zhang, 2025. "Can digital transformation improve commercial banks’ performance?," The Journal of Technology Transfer, Springer, vol. 50(4), pages 1341-1362, August.
    11. YingShan Xu & Ainul Mohsein bt Abdul Mohsin & Fan Yang, 2025. "Market concentration, digital transformation, and bank credit risk in China: evidence from GMM estimation," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-13, December.
    12. Chen, Yuling & Che, Zhen & Wan, Dongqi, 2024. "How does the financial technology innovation regulatory pilot influence financial regulation?," Finance Research Letters, Elsevier, vol. 69(PB).

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