Credit Doubles In China

After the furore surrounding the Northern Rock story in the UK over the past week, alarms bells might be ringing over this story about the growing credit culture in China. The number of credit cards in China has gown by a whopping 800% in just four years! So far China has been quite tough on its stance as to international banks offering credit cards to the Chinese population – however, its stance is softening and the floodgates may be about to burst open.


By Jamil Anderlini in Beijing
Friday, September 14, 2007

The number of credit cards in circulation in China has more than doubled over the past year to more than 40m as a credit culture begins to take shape in the country, according to a report released today.

Penetration rates remain well below those in comparable societies like Taiwan and Hong Kong, leaving huge potential for an industry that should provide Rmb13bn ($1.73bn) in profits by 2013, according to the report from McKinsey, the consultancy.

But international banks re- main barred from issuing credit cards in China and the card business is still unprofitable for domestic banks.

The sector’s growing potential increases pressure on Beijing to implement long-awaited rules allowing foreign banks to issue cards, in keeping with its World Trade Organisation accession commitment to provide “national treatmentâ€? by the end of 2006.

Analysts say the government is protecting domestic banks in the fledgling sector but is soon expected to open it to foreign banking groups such as HSBC and Citibank, which are now only allowed to offer co-branded cards with domestic partners.

For the last few years Beijing has encouraged the creation of a consumer credit industry to promote private consumption and rebalance China’s rapid economic growth, which relies heavily on fixed asset investment.

The report estimates the num- ber of true credit cards in China doubled for each of the last four years to reach about 43m by the middle of this year.

As the necessary payment infrastructure expands rapidly across the country, Chinese consumers are using credit cards to pay for an increasing array of goods and services.

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