The push of U.S.-based credit card companies to finally gain access to the Chinese mainland has hit yet another bump. Reuters reports that the Chinese government is pushing foreign payment card companies to form local joint ventures for onshore operations, said three people familiar with the matter.
The move to require such a pair-up seems to run up against a pledge of market access Beijing made to U.S. President Donald Trump. The Trump administration has been a vocal opponent of what it calls China’s “mercantilist policies.” U.S. Trade Representative Robert Lighthizer has critiqued China for forcing companies into joint ventures.
The new requirement comes after a decade-long battle U.S. card companies have waged trying to crack the Chinese market — which will likely be the No. 1 bank card market in the world within the next three years. U.S. and Chinese officials had agreed on a May deadline for guidelines for U.S. firms for the launch of local operations. The goal was “full and prompt market access.”
And while no formal change has been made, foreign card issuers who had been pursuing wholly owned operations in China have “informally” been told by the authorities to enter into equity joint ventures with local players to gain that market access. Whether or not foreign firms can own a majority stake in these ventures remains unknown — in most other financial services businesses in China, 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 a person close to the matter.
Visa 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. That application has since been put on hold, and Reuters reports that Visa now must firm up an equity partner relationship before submitting again.
A spokesman for American Express said the company had submitted an application for a payment clearing and settlement license in China.
“We continue to consult with the PBOC and will seek their guidance as we progress,” he said, without elaborating.
A Visa spokeswoman said the company had put in an application with the Chinese central bank and that it is expecting a decision “in line with the publicly released measures and guidelines.”
Mastercard did not respond to request for comment.