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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