For Payments Firms, Trade Deal’s First Step In Long Journey Into China

cross border payments

The trade deal between China and the U.S. – Phase One, anyway — has been signed. Now comes the hard part: Making sure both sides comply with the spirit and tenets of the agreement. Here’s our dive into the implications and the language surrounding financial services, eCommerce and what’s in the cards for (credit) cards.

Phase 1.

As the old saying goes: It’s a start.

Or, perhaps to take a line from an old Chinese proverb, a journey of a thousand miles begins with a first step.

To that end, the first phase of the trade deal with China tackles a number of competitive issues between the two countries, if not fully resolving them.  Maybe call it the beginning of the beginning.

It’s telling, perhaps, that the very first section of the document itself focuses on intellectual property.

As stated in the agreement: “The United States emphasizes trade secret protection. China regards trade secret protection as a core element of optimizing the business environment. The Parties agree to ensure effective protection for trade secrets and confidential business information and effective enforcement against the misappropriation of such information.”

How to get there? Each country will “be able to operate openly and freely in the jurisdiction of the other Party without any force or pressure from the other Party to transfer their technology to persons of the other Party.”

Perhaps key: transfers of technology, or of licenses will be voluntary – and reflect “mutual agreement.”

China is also tasked with creating an action plan “to strengthen intellectual property protection aimed a promoting its high-quality growth” within 30 days after the trade agreement goes into effect.

The language is not explicitly tied to recent activities from the Treasury Department (and specifically mandated by the Foreign Investment Risk Review Modernization Act passed by Congress in 2018).  As has been reported earlier this week, the Treasury Department expanded the ability of the Committee on Foreign Investment to scrutinize transactions.

But the nod seems there to more fully address where data and other types of information resides and how it is transferred between companies and between the two nations.

Recall that two years ago, CFIUS shot down Ant Financial’s bid to buy MoneyGram for $1.2 billion, and more recently, there has been an investigation launched into TikTok, the social media and streaming app.

Asset Management

The trade document states that “the Parties shall work constructively to provide fair, effective, and nondiscriminatory market access for each other’s services and services suppliers. To that end, the Parties shall take specific actions … with respect to the financial services sector.”

A market worth as much as $40 trillion opens up a bit – but it was going to, anyway.

The deal states that there will be improved access to markets such as insurance, banking and fund management.

The language in the agreements notes that at least some timelines to open up Chinese markets are being accelerated. For example, a deadline that would have lifted ownership caps on the securities industry — spanning brokerages, underwriting and investment banking — is being lifted by April 1, not December, as had been previously planned.

In previous examples that the markets were opening a bit, back in 2018, the Chinese government lifted the cap on foreign ownership on joint ventures to 51 percent from 49 percent.

JPMorgan last month obtained approval from China to establish a majority-owned securities business in the country. By opening access to China, digital banking, at least as rendered through wealth management, for example, may get a broader embrace.

… and What’s In the Cards For The Cards

Beyond what might be thought of as traditional asset management activities, China seems to be giving card companies a bit of accelerated time frame to at least be considered entry into the country — as standalone entities rather than through joint ventures.

China will accept “any applications from a U.S. electronic payment services supply including an application of supplier seeking to operate as a wholly foreign-owned entity” to begin prep work to operate as a bank card clearing institution within five working days.

The decision on the application will come within 90 days, according to the document. Visa, Mastercard and American Express are named in the text.

The statement, of course, follows the news earlier this month that American Express’s bid to bring its operations directly into the country has been approved. PayPal, of course, is pretty much already there through its GoPay deal.

As might impact payments — especially cross border transactions — language in the document states that “the Parties shall refrain from competitive devaluations and not target exchange rates for competitive purposes, including through large-scale, persistent, one-sided intervention in exchange markets.”

That might, at least in our view, improve the playing field for companies when (or if?) they do indeed enter each others’ markets, especially in financial services. Also, avoiding currency wars can help consumers feel a bit easier about opening their wallets in eCommerce interactions.


In fact, eCommerce gets an explicit nod in the document, which calls on China and the U.S. to strengthen cooperation and jointly as well as individually combat infringement and counterfeiting.

“China shall provide enforcement procedures that permit effective and expeditious action by right holders against infringement that occurs in the online environment, including an effective notice and takedown system to address infringement” the parties state.  China shall provide that e-commerce platforms may have their operating licenses revoked for repeated failures to curb the sale of counterfeit or pirated goods.

Specific eCommerce platforms are not named.  But in an interview with CNBC Thursday, White House trade adviser Peter Navarro said that “the Amazons and the Alibabas, Shopify, they have been facilitators of the Chinese counterfeiting. So, if we’re going to enforce this deal, it’s going to be a big part of that is scrutinizing this … right now it’s skewed. If you’re an intellectual property rights holder, whether you’re Michael Kors or Louis Vuitton or Pfizer selling prescription drugs, the onus is really on your company to police the internet, where a lot of this counterfeiting occurs. That’s not right.” He went on to say that: Amazon, Alibaba, Shopify,,, all of these companies have a responsibility to police the problem.”

The ink is dry, the handshakes shaken.

Now comes the hard part.



Banks, corporates and even regulators now recognize the imperative to modernize — not just digitize —the infrastructures and workflows that move money and data between businesses domestically and cross-border.

Together with Visa, PYMNTS invites you to a month-long series of livestreamed programs on these issues as they reshape B2B payments. Masters of modernization share insights and answer questions during a mix of intimate fireside chats and vibrant virtual roundtables.