After ChatGPT breakthrough, Chinese regulator mulls use of AI chatbots in financial regulation
A Chinese financial regulator has expressed interest in using artificial intelligence (AI) in monetary policy, after ChatGPT, an AI chatbot, triggered investment interest and promises of public support in the world's No 2 economy.
Lu Lei, deputy head of the State Administration of Foreign Exchange (SAFE), the country's foreign exchange regulator, said technology like ChatGPT could lead the digital revolution over the next 10 years.
"If we use the ideas of generative AI to study financial issues, it may help form an effective technical route for financial development and governance," he said.
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Lu made the comments at the annual conference of the China Society for Finance and Banking on Tuesday, which was also attended by central bank governor Yi Gang, former governor Zhou Xiaochuan, and Eddie Yue, chief executive of the Hong Kong Monetary Authority.
Lu, who previously oversaw the research and financial stability bureaus of the Chinese central bank, is the first official to openly express interest in using ChatGPT and artificial intelligence in financial regulation.
ChatGPT, a conversational bot that Microsoft-backed OpenAI unveiled in November, is able to understand sophisticated questions and give surprisingly humanlike text responses.
"What shocked me was not only the 2022 Gartner report, but also the latest Microsoft report on artificial general intelligence, both of which reflected the high consistency between the GPT thinking and monetary authorities' cognitive and decision-making logic," he said.
SAFE oversees China's US$3.1 trillion worth of forex reserves, its balance of international payments and also cross-border capital flows.
Chinese regulators have shown openness to new technology, especially if it has potential to improve financial stability.
Such a mindset has enabled fast progress in the research and development of the digital yuan, or e-CNY, putting China in the box set among major economies in development of a sovereign digital currency, with pilots started in 26 cities nationwide with accumulated transaction value of 100 billion yuan (US$14.5 billion) by end-August of last year.
Developing artificial intelligence is a government priority, especially as China's digital economy now accounts for about 41 per cent of gross domestic product and is a key driver of future growth.
"The behaviour of monetary authorities to perform functions such as ensuring the sound operation of the real economy and the financial system can be understood as generative information," Lu said, drawing a connection with generative AI, which learns to make decisions on past data.
Currently, regulators look at indicators like the capital adequacy ratio and provision coverage ratio to assess the health of the banking system. The SAFE official said these traditional tools could make way for a new regulatory system mainly targeting liquidity, fraud and mismanagement in the future.
Beijing's focus on regulatory technologies comes as a banking crisis in the United States and the subsequent international turbulence posed a new test for monetary authorities and financial regulators.
Lu said that international shocks similar to those caused by Silicon Valley Bank or Credit Suisse could become more frequent and severe.
"Liquidity and expectation management should become the main considerations of monetary authorities," he said, noting the powerful computing and processing capability of AI technologies.
"Pre-adjustment and fine-tuning will be genuinely implemented only if risks and behaviour errors can be identified according to real-time data."
This article originally appeared on the South China Morning Post (SCMP).
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