Emergence of AI in China's Finance Industry
Recent years have borne witness to China's continuing consolidation of infrastructure supports such as mobile internet, big data, and cloud computing. The development of technologies, such as machine learning, computer vision, and natural language processing, is also noticeable.
In the meanwhile, significant progress has been made in improving the quality and efficiency of financial services in China and optimizing investment decisions through the use of artificial intelligence.
In the last 40 years since the Chinese economic reform, China's GDP has increased 33.5 times, at a rate of 9.5% annually, according to data from the National Bureau of Statistics.
At the same time, government policies served to develop a conducive environment for the application and development of AI in the financial sector.
In May 2017, the People's Bank of China set up the FinTech Committee to strengthen the research planning and overall coordination of financial science and technology work.
In July, the Development Plan of the New Generation Artificial Intelligence listed finance as one of the key areas to pilot AI applications and upgrade industrial intelligence.
Furthermore, it proposed measures such as establishing big data systems in finance, developing intelligent financial products and services, and strengthening intelligent early warning and prevention of financial risks.
In October, the 19th National Congress of the Communist Party of China proposed to promote the deep integration of Internet technology and the real economy in order to foster new growth points and drive innovation in several fields.
In March 2019, the Government Work Report proposed to deepen research and development applications such as AI and the digital economy. In August, the People's Bank of China issued the FinTech Development Plan (2019-2021), which required the overall optimization of AI core assets, such as data resources, algorithm models, and computational support to steadily promote the in-depth integration of AI technology and financial business.
With a supportive economic and political climate, AI is bringing a new round of changes to financial products, customer service, risk management, and investment decisions.
AI has given birth to many new financial products, with AI funds being the prime example. The most popular ones are Baoying (A: 005962, C: 005963), Rongtong (LOF) (A: 161631, C: 009239), Qianhai (001986), Wanjia (006281), South (005729), East (005844), etc. For example, in 2019, the CSI 300 rose 36.07%, the ChiNext rose 43.79%, and the entire market fluctuated upward. Meanwhile, during the reporting period, the net value of the Baoying A (005962) increased by 80.63% and Baoying C (005963) rose 79.19%, the benchmark return for performance over the same period was 35.70%.
With regards to intelligent customer service, at the end of 2015, the Bank of Communications launched China's first smart service robot, Jiao Jiao. Jiao integrates many cutting-edge AI technologies, including speech recognition, speech synthesis, natural language processing, faceprints, and voiceprints.
Currently, Jiao Jiao is deployed in Shanghai, Jiangsu, Guangdong, Chongqing, and other provinces. In April 2018, China Construction Bank launched China's first "unmanned bank," which solely uses artificial intelligence to handle business.
In mid-2019, Ping An Bank highlighted that with the continuous accumulation of application scenarios, the replacement rate of Ping An Bank's voice customer service has reached more than 80%. In contrast, the volume of customer service has increased by 2-3 times. As a result, the labor cost of customer service has decreased by 40%.
Over recent years, Robo-advisors have evolved from being an experimental technology to becoming mainstream. At the end of 2016, China Merchants Bank's mobile phone app launched China banks' first Robo-advisor "Machine Gene Investment." Since then, Robo-advisors have expanded rapidly in China. The big four commercial banks in China (BOC, ABC, ICBC, CCB) have successively deployed similar services.
Other joint-stock banks besides CMB, such as Shanghai Pudong Development Bank, CITIC Bank, Xingye Bank, Ping An Bank, and Guangfa Bank, have also built their own Robo-advisors. Among city commercial banks, Jiangsu Bank released "Alpha" as early as August 2017. Securities companies, such as Guangfa Securities, Everbright Securities, and Huabao Securities also developed Robo-advisors service.
Wealth management companies, such as Blue Ocean Wealth and internet finance companies, such as Ant Financial, Pocket Wealth, and Shanghai DataSeed Information Technology have also launched their own Robo-advisors.
With the growth and development of China's AI technology, the financial industry is becoming increasingly more intelligent. As Yonglin Xie, the chairman of Ping An Bank, stated, "No matter if it is basic retail or consumer finance, private banking, or wealth management, all of it should be fully AI-based."
Written by Jimei Shen
Edited by Alexander Fleiss, Vishal Dhileepan, Juan Agudelo, James Rhinelander & Kevin Ma