Governing through Category Ambiguity: The Making and Remaking of Regulatory Boundaries in China’s Internet Finance

• In Event: Reconfiguring State–Market Relations in Contemporary Capitalism

Abstract

Regulators draw on categorical distinctions to determine the scope and form of oversight. When financial innovations are ambiguous to regulatory categories, they pose governance challenges. This dynamic is evident in the rise of Internet platform companies that straddle technology and finance, generating ambiguity over what constitutes “finance” and who should be subject to oversight. While such ambiguity is typically expected to be resolved through clarification or reform, China’s Internet Finance sector remained without definitive regulatory closure for nearly a decade prior to the 2020 crackdown. Why would a strong state sustain prolonged ambiguity in a financial system known for tight supervision?

This article challenges dominant explanations that treat regulatory ambiguity as either an epistemic limitation or a form of strategic vagueness. I develop the concept of category ambiguity, defined as indeterminacy over how emerging practices should be classified, to explain how the state governs the Internet Finance sector. Drawing on interpretive discourse analysis of regulatory documents and official speeches from 2008 to 2022, I trace how Chinese regulators produce, maintain, and eventually resolve categorical ambiguity. By leaving unsettled whether platform firms were “technology companies” or “financial intermediaries,” regulators created an experimental space in which new financial practices expanded without triggering stringent oversight while preserving the capacity to intervene as risks accumulated. While prior research emphasizes the fragility and limitations of ambiguity, this study demonstrates that prolonged categorical ambiguity constitutes a governance mechanism structuring market emergence and the boundaries of state supervision.

Author

• Yilin Zhu, University of California-San Diego