MOSCOW, October 30 (RIA Novosti) — Chinese authorities have eased the monopoly on its domestic credit market, by allowing Visa and Mastercard entry into a fast expanding market worth over $1 trln a year, the government said Wednesday.
For the first time in its history Chinese authorities have eased the monopoly on its domestic credit market, by allowing Visa and Mastercard entry into a fast expanding market worth over $1 trln a year, the government said Wednesday. Beijing has not yet released any details or timeline for the decision’s practical implementation, but they did say that qualified domestic and foreign enterprises may apply for establishment licenses, as reported by the Wall Street Journal.
Previously, due to governmental restrictions, all domestic banking card services were monopolized under the national UnionPay processing system. All mainland banks were obligated to participate in UnionPay and all transactions denominated in renminbi were processed exclusively via this system. Now, after yesterday’s decision, Visa and Mastercard are eager to enter the new market.
The World Trade Organization ruled two years ago that such practice violate free trade agreements after the US brought suit. However, it was only now that Beijing has eased its policies.
The world’s leading financial services provider, Visa, has already responded positively to the news from Beijing. "We look forward to seeing the specific details and working with people within China to figure out what we need to do to participate in that marketplace, where we believe we can add a lot of value," Visa Chief Executive Charlie Scharf said as quoted by Reuters.
Mastercard, the second largest payments enterprise in the world also welcomed the move saying, "We will continue to monitor closely and look forward to the day when we can compete for domestic business in China."
In August, total households debt in China was estimated at 37% of GDP, while in the US the same figure is 81%. Given these numbers, the credit card market in China has some enormous growth opportunities. Popularity of online retailers is on the rise globally, adding to the bright perspective of China’s domestic financial services market. Credit card transactions jumped by 30% in 2013 compared to the year earlier with 61 mln new cards issued in 2013, the Guardian reports. Total debt on China’s credit cards reached $300.9 bn at the end of 2013, up 62% year-on-year, the Wall Street Journal reports.
US officials expressed skepticism at Beijing’s initiative, as it took roughly two years for the Chinese authorities to take ease their regulations after the initial US complaint. “We are encouraged that there are signals,” Myron Brilliant of the U.S. Chamber of Commerce said as quoted by the Wall Street Journal. “Until we see what that means, until we see proof of it, until we see time frames, we don’t have a deal.”
“We look forward to the issuance of those specific provisions to implement the State Council’s statement in a manner that is consistent with the WTO’s decision,” said Matt McAlvanah, a spokesman for U.S. Trade Representative Mike Froman as quoted by the Wall Street Journal. “The United States remains committed to ensuring that China opens the electronic payment services sector to foreign companies on fair and open terms.”
China’s burgeoning banking sector is yet another step for the country towards greater liberalization of their financial services. It isan attempt to revive cooling economic activity in China and maintain their economy’s competitive edge. In September, Beijing announced plans to open the domestic delivery market for foreign companies, including FedEx and United Parcel Services.