Licensing and Retained Funds Regulation of Internet Third Party Payment Providers in China

As a newly emerging electronic payment instrument, Internet third party payment is becoming increasingly popular and influential in China and has attracted regulatory attention from the Chinese central bank -- People’s Bank of China. Aiming at broad international readership and policy makers, this article introduces working mechanisms of the Internet third party payment; discusses the crucial forthcoming Chinese legislation -- the ‘Measures of Management on Payment and Clearance Organisations’ in detail; and analyses the international aspects of the ‘Measures’ by taking into account of the market situation in China. Also, the article critically analyses two key legal aspects of the regulation of Internet third party payment provider in China -- licensing and retained funds regulation. It suggests that a more light regulation approach should be adopted in the licensing issues. Meanwhile, six points, such as liquidity, ownership and insolvency, relating to retained funds regulation are also examined in detail in the article.