A bank employee prepares bank notes. The State Council moved to scrap a rule that caps lending by commercial banks at 75 percent of their deposits, a measure that will increase the supply of cash in the financial system. [Photo/China Daily]

The central bank's draft regulation that sets a 5,000 yuan ($805) ceiling for online payments among non-banking agencies has sparked intense debate and controversy, with critics denouncing it as a move that compromises the interests of consumers.

In response, the monetary authorities have argued that the move is aimed at dealing with the emerging problems and risks resulting from the rapid development of domestic payment platforms.

Market analysts are more concerned about what kind of attitude the financial regulator holds toward online payments rather than the limit on such payments. Some have expressed worries that clauses in the regulation excessively stress consumer safety at the cost of consumption and narrow the space for enterprises' financial innovations.

The debate over the regulation should be welcomed, because it can demonstrate that under the impact of a booming mobile Internet industry, China's financial sector has entered an era of financial governance with both regulation and innovation.

If financial regulation and innovation are proved a cat-and-mouse game, the whole society will be the largest loser, as either ordinary consumers or the whole economy will be able to get high-efficient, safe and convenient financial services. Delayed financial open-up has not only caused financial repression in China, but has also made more outstanding contradictions between regulation and innovation in this area.

It is understandable that the authorities want to be vigilant regarding this high-risk sector, but there should be a consensus that innovators in the provision of financial services should be allowed to adopt a try-and-correct-if-necessary approach.

The monetary authorities should try to strike a balance between preventing risks and encouraging innovation. Any heavy-handed move by the regulators will suffocate a fledging sector, which might even check the vitality of the entire economy.

The above is an Economic Observer article published on Monday.