The approval is part of the country’s decision to open its financial system, which was agreed upon as part of the “phase one” trade deal with the U.S.
The central bank said Mastercard and its partner, NetsUnion Clearing Corp. have to complete all preparation work within 12 months.
“The approval of the preparation application of the bank card clearing institution of Wanshilian is another concrete reflection of China's opening up of the financial industry and deepening financial supply-side reform,” according to the statement.
Mastercard said the stance is “encouraging,” since China is among the most pivotal markets to enter. Following preparations, a final approval will be needed, Mastercard said in a statement.
As part of China’s trade deal with the U.S., Chinese regulators said applications from providers of electronic-payments services would be considered within 90 days. Mastercard set up its majority-owned joint venture nearly a year ago.
Mastercard and Visa have voiced complaints that it had been taking too long to gain entry into China’s market, making it more difficult to compete against the growing domestic pool of mobile payments firms in the country. Mobile transactions topped 190 trillion yuan ($27 trillion) in China in 2018, making it the world’s largest such market, according to the Chinese research firm iResearch.
By the close of September, 90 percent of China’s 8.2 billion bank cards in circulation were debit cards.
China’s opening of its financial markets gives foreign companies the opportunity to launch insurance businesses, asset management and investment banking. The country changed its rules in 2015 so that licenses could be granted to foreign bank-card clearing providers by establishing units or acquiring a local company. The move essentially ends the monopoly by state-run China UnionPay Co.
American Express was approved by China’s central bank in January to start a bank card clearing business. The application being accepted is a sign that final approval is imminent.
Earlier in January, Mastercard confirmed it was in active talks about different solutions with China. “China remains a vital market for us and we look forward to working with the Chinese government and local partners in growing and developing the overall payments ecosystem in the long-term. We believe our participation here will be beneficial to the country and its people,” Ling Hai, co-president of Asia Pacific at Mastercard, said in a press release.