Beijing eases state-owned monopoly on credit cards
Rules covering credit cards to change to allow foreign companies the right to set-up clearing operations in the mainland in move seen as market liberalisation
PUBLISHED : Thursday, 30 October, 2014, 1:33pm
UPDATED : Thursday, 30 October, 2014, 1:33pm
Associated Press in Beijing
A change in the rules governing credit card use in China may offer opportunities to Visa and Mastercard. Photo: Reuters
China says it will ease restrictions on credit cards in a move that might give Visa, Mastercard and other foreign competitors greater access to its market.
Foreign companies will be allowed for the first time to apply to establish credit card clearing operations in China, said a Cabinet announcement late on Wednesday. It gave no details of what qualifications would be required for a foreign competitor to be approved or when licenses might be issued.
Beijing’s restrictions have given a monopoly on credit card processing to a state-owned entity, UnionPay. All banks are required to participate in UnionPay and all transactions must be processed through it.
The World Trade Organisation, ruling on a complaint by the United States, said two years ago the restrictions violated China’s free-trade commitments by treating foreign credit card processors unequally. The government said it would review the decision but did little to increase market access.
Wednesday’s statement said the move was aimed at opening up China’s financial industries.
Beijing had previously given a monopoly on credit card processing to state-owned financial entity UnionPay. Photo: Reuters
The ruling Communist Party has promised ambitious market-opening measures in an effort to make the slowing, state-dominated economy more efficient and productive.
Foreign credit cards issued abroad are accepted by some hotels and other businesses in China but foreign companies are barred from issuing cards in the country’s growing consumer market.
Credit card transactions in China rose 30.9 per cent last year over 2012 to 13.1 trillion yuan (HK$16.6 trillion), according to an industry group, the China Banking Association. It said 61 million new cards were issued in 2013.
At the same time, internet companies such as Alibaba and Tencent are launching mobile payment services that might compete with credit cards.
Despite their lack of market access, foreign credit card companies are promoting themselves to Chinese consumers who can use the cards abroad.
Visa was a sponsor of the 2008 Beijing Olympics and Mastercard paid to have a former Olympic sports facility renamed the Mastercard Centre.
