Five banks have been authorized to issue Chinese credit cards…
Citigroup, Britain’s HSBC Corp. and Standard Chartered Bank Ltd., and Hong Kong’s Bank of East Asia Ltd. and Hang Seng Bank Ltd. have been given permission to issue the first foreign institution Chinese credit cards once they meet regulatory standards. The five banks have received permission by the Chinese government to set up Chinese subsidiaries, the first step required to handle business in Chinese currency, the yuan.
Up until now, foreign banks were required to work through local partners to issue Chinese credit cards and credit related products. But following their approval, foreign banks will now be allowed to work independently for the first time. “After they have satisfied technical standards, the banks can officially start bank card services,” said Qi Jianming, a deputy director of the China Banking Regulatory Commission, in comments posted Tuesday on a government Web site. No timetable for approvals was given.
In the 1990s, credit cards were almost non-existent in China. But demand has grown as income and spending has risen among 1.3 billion Chinese citizens. As the government lowers regulatory barriers to meet World Trade Organization commitments, foreign banks are eager to share in the booming Chinese credit card market. Beijing is gradually loosening standards while it works to modernize their state-owned banks, which lag behind foreign rivals in their ability to offer consumer services.
According to the consulting firm McKinsey & Company, Chinese credit card holders have jumped from 3 million in 2003 to over 40 million last year. McKinsey estimates that revenues could rise to as much as $5 billion (US) by 2010, if Beijing sticks to its commitments to lower barriers to competition in the market.