Foreign credit card firms hit JV obstacle in China push
HONG KONG/BEIJING: China is pressing foreign payment card companies to form local joint ventures for onshore operations, said three people familiar with the matter, a move that would counter a pledge on market access Beijing made to US President Donald Trump.
The push to get foreign card issuers to enter into equity tieups with Chinese companies, instead of running fully-owned units, comes ahead of Trump’s visit to China this week, and could further delay access to China’s rapidly-growing market for foreign card companies like MasterCard and Visa.
The Trump administration has been a fierce critic of what it sees as China’s mercantilist policies. In September, Robert Lighthizer, the US Trade Representative, criticized China for forcing companies into joint ventures.
Trump also called the US trade deficit with China “horrible” ahead of a trip to Asia that started Friday and includes visits to five countries, including China.
Foreign card companies have been lobbying for more than a decade for direct access to China, which is set to become the world’s No.1 bank card market by 2020, according to GlobalData, a research company.
In 2012, the World Trade Or- ganisation ruled that China was discriminating against foreign card companies.
In May, Beijing and Washington agreed on a deadline for China to issue guidelines for the launch of local operations by US payment network operators, leading to “full and prompt market access”.
Some of the foreign card issuers, who were looking to set up their wholly-owned operations in China, have ‘informally’ been told by the authorities to enter into equity joint ventures with local companies, said the three people, who have been briefed on the discussions with the central bank.
It was not immediately clear whether the foreigners would be allowed to own majority stakes in the joint ventures, the people said.
In most other financial services businesses, foreign companies are allowed to own minority holdings.
“While this is in line with how they treat foreign investments in other financial services, expectations were building up for wholly- owned operations because foreign firms can never be a big competitor to UnionPay,” said one of the people.
The person was referring to the near monopoly of the statebacked China UnionPay Co Ltd in the domestic bank card market.
Visa, the world’s largest payments network operator, was the first to submit its application for a license in July, after the People’s Bank of China (PBOC), the central bank, issued the guidelines on June 30.
Visa’s application, however, has been put on hold, and the company has been asked informally to firm up its local equity partnership before resubmitting the application, said two people familiar with the matter.
All the people who spoke to Reuters declined to be named due to the sensitivity of the issue.
The PBOC did not respond to a faxed request for comment. A spokesman for American Express said the company had submitted an application for a payment clearing and settlement license in China. — Reuters