Banking in China - Credit and Debit Cards

Credit and Debit Cards

By the end of the first quarter of 2009, about 1,888,374,100 (1.89 billion) bank cards had been issued in China. Of these cards, 1,737,901,000 (1.74 billion) or 92% were debit cards, while the rest (150,473,100, or 150.5 million) were credit cards. In 2010 China had over 2.4 billion bankcards in circulation growing approximately 16% from the end of 2009.

At the end of 2008, China had approximately 1.84 million POS machines and 167,500 ATMs. About 1.18 million merchants in China accept banking cards.

At the end of 2008, there were 196 issuers in China that issue China UnionPay-branded cards. These issuers include the ‘big four’ banks (Industrial and Commercial Bank of China, the Bank of China, China Construction Bank, and the Agricultural Bank of China), as well as fast-growing second tier banks and city commercial banks, and even some foreign banks with local operations.

Most of China's state-owned commercial banks now issue dual-currency cards, allowing cardholders to purchase goods within China in RMB and overseas in US dollars (Visa/MasterCard/AmEx/JCB), Euros (Visa/MasterCard), Australian dollars (MasterCard), or Japanese yen (JCB). However, only Bank of China provides yen and Australian dollar-denominated credit cards.

According to a 2003 research study by VISA, the average per transaction purchase with a card was USD 253. Consumers used their credit cards mainly to purchase houses, vehicles, and home appliances, as well as to pay utility bills.

One major issue is the lack of a national credit bureau to provide credit information for banks to evaluate individual loan applicants. In 2002, the Shanghai Information Office and the People’s Bank of China Shanghai branch established the first personal credit data organization involving 15 commercial banks. The Chinese Government, aiming to promote a nationwide credit system, has also set up a credit system research group. At present, large cities, such as Beijing, Guangzhou, Shenzhen, Chongqing, and Chengdu, are calling for a reliable credit data system. The PBOC is currently evaluating the feasibility of establishing a nationwide credit bureau.

Other obstacles include lack of merchant acceptance and a weak infrastructure for card processing. At present, only 2% of merchants in China are equipped to handle card transactions, although in some major cities like Shanghai the percentage is over 30%. China UnionPay was established to set up a national processing network connecting merchants and banks. China UnionPay has set up bankcard network service centers in 18 cities in addition to a national bankcard information switch center.

Products and services in the credit card system that the Chinese government wants to develop are credit card-related hardware, including POS and ATMs, credit card-related software for banks and merchants; and Credit and risk management training programs.