China regulator says financial innovation must not create oligopolies

China should ensure financial innovation maintains fair competition and does not create oligopolies or construct barriers to entry, a Chinese regulatory official said Saturday.

Xiao Yuanqi, chief risk officer at the China Banking and Insurance Regulatory Commission (CBRIC) told the Caixin Summit in Beijing that innovation should not undermine healthy competition or let innovation pioneers become hindrances to further innovation.

Xiao defended the role of financial regulation in maintaining a fair market competition environment, reducing "too big to fail" moral hazards and maintaining financial stability.

"History tells us that before each major financial crisis ... markets were irrationally exuberant. Regulation is meant to return this exuberance to rationality, and resolutely does not support continuing to push exuberance toward crazy so-called innovation," he said.

Xiao's comments follow the scuppering of Ant Group's $37 billion initial public offering shortly after the fintech giant's billionaire founder Jack Ma launched a public attack on China's financial regulators.

Ma said China's regulatory system was stifling innovation and needed to be reformed to fuel growth.

The Wall Street Journal reported this week that Chinese President Xi Jinping personally decided to pull the plug on the IPO, ordering Chinese regulators to investigate and effectively shut down the stock market flotation.

Xiao did not directly respond when asked for his views on a series of defaults of state-owned enterprises that led to a sharp sell-off in China's corporate bond market this week.