BEIJING -- Financial technology (fintech) has continued to grow in China amid regulators' increasing scrutiny in controlling risks, and the trend of rising investment and innovation in the sector will progress, according to the latest report from Fitch Ratings.

Fintech has seen rapid growth in China due to a favorable environment fostered by the wide use of mobile devices and the internet, a strong digital payment ecosystem, and the government's promotion of technological and financial innovation to support economic growth, the report noted.

China's financial institutions have actively embraced fintech to protect their franchises and broaden business opportunities, enhance credit risk management, and improve efficiency.

"The trend has been accelerated by the COVID-19 pandemic as consumers increase their use of online services and purchases," read the report.

However, the risks associated with the rapid growth prompted regulators to step up their scrutiny, aiming to control the risks and ensure the more sustainable development of the sector.

Fitch Ratings said tightened regulations may pose short-term challenges for some industry participants while protecting some industry incumbents, but the trend of rising fintech investment and innovation should progress given the benefits.