By Dinny McMahon
BEIJING--China is taking a step toward easing its grip on credit
cards, potentially resolving a long-running trade dispute with the
U.S. and allowing foreign companies like Visa, MasterCard and other
electronic payment processors to have a greater presence there.
The State Council, the nation's cabinet, said in a statement on
the main government website late Wednesday that qualified domestic
and foreign firms can apply to set up bank card-clearing
operations. The statement, which said the move is part of efforts
to open up China's financial sector, followed a cabinet meeting
chaired by Chinese Premier Li Keqiang.
Currently, China UnionPay Co. has a near monopoly on processing
and clearing yuan-denominated payments made by bank cards and
credit cards. The state-controlled firm has close ties to China's
central bank. UnionPay officials couldn't be reached for comment
late Wednesday.
The brief mention in the statement didn't set out a timeline or
release further details, so the speed and scope of any move to open
up China's credit card market isn't clear.
Foreign firms like Visa, MasterCard and American Express have
been jockeying for a greater share of that business for years.
China is still fostering a nascent consumer class, and credit cards
are widely believed to have tremendous room to grow.
According to a report from the People's Bank of China, there was
1.84 trillion yuan worth of outstanding debt on China's credit
cards at the end of 2013, up nearly 62% from a year earlier.
China's banks had issued 391 million credit cards, up 18%.
The promise is at the root of the trade dispute involving
Chinese credit cards. Two years ago a World Trade Organization
panel found China's rules governing access to its domestic
electronic-payments market don't provide equal treatment to foreign
credit-card and debit-card issuers, though it stopped short of
labeling UnionPay a monopoly.
China said at the time it would assess the decision. Beijing has
been slow to change its market access rules in response to the WTO
decision, and Thursday's disclosure comes as UnionPay has grown
increasingly strong and is potentially in a position to withstand
the imminent arrival of competition from overseas. It has expanded
globally, and its tricolor logo has become more common on ATMs and
sales counters around the globe, meaning that Chinese consumers can
use the same card both at home and abroad.
At the same time, the business of electronic payments in China
is shifting dramatically. Chinese Internet giants have branched out
into electronic payments--particularly in mobile services like
payment apps--in a potential challenge to UnionPay and the rest of
China's state-dominated banking sector. Growing services provided
by e-commerce giant Alibaba Group Holding Ltd. and Internet
conglomerate Tencent Holdings Ltd. allow Chinese consumers to buy
goods online, store cash and even send funds to each other, often
with the touch of a finger to a smartphone.
Earlier this week, at the WSJD Live global technology
conference, Alibaba Executive Chairman Jack Ma said he was
interested in teaming up with Apple Inc. to explore electronic
payments. The statement came after the gadget maker added more
payment capabilities to its newest iPhones.
The PBOC has at times moved against the upstarts in ways that
seem to benefit UnionPay. In March it ordered the suspension of
online payments using QR codes and virtual credit cards in
smartphone payment systems, two payment methods being pioneered
domestically by Alibaba and Tencent.
The credit card companies have long eyed China. Visa for years
has provided training and technical advice to Chinese officials
trying to build a domestic payments system. In 2008 Visa was one of
the main sponsors of the Beijing Olympics--despite the fact that
the only business it got from Chinese customers was when they went
abroad and spent dollars and other foreign currencies.
China's State Council also said in its statement that foreign
institutions that provide only cross-border transaction clearing
services don't need to set up branches in China.
Grace Zhu
Write to Dinny McMahon at dinny.mcmahon@wsj.com
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