38.6c New Delhi, India, Saturday, March 02, 2024

American Express JV gets final nod from China’s Central Bank; to launch onshore operations in the country soon

By Manthan Pandit      Jun 15, 2020      0 Comments
American Express JV gets final nod from China’s Central Bank; to launch onshore operations in the country soon

China's Central Bank has issued approvals for a network clearing license to facilitate a joint venture with American Express, thereby allowing it to be the first international credit card firm to begin onshore operations in China. 

The nod comes against a backdrop of high tensions between the Sino-US, with disagreements about trade and the imposition by Beijing of a Hong Kong national security law. 

In a statement on Saturday (13th June 2020), the People's Bank of China (PBOC) said that it had approved the license for Express (Hangzhou) Technology Services Co., a joint venture between American Express and LianLian DigiTech Co Ltd. It stated that the move reflected upon the opening up of China's financial industry.

In January, the PBOC said it had received an application from American Express to start operations in China. 

American Express said in a statement that it expects to kickstart transactions later in the year. 

"This approval represents an important step forward in our long-term growth strategy and is a historic moment, not only for American Express but for the continued growth and development of the payments industry in mainland China," Stephen J. Squeri, chairman and chief executive officer of American Express, said.

The PBOC also approved a bid by Mastercard 's China Joint Venture to conduct the country's bank card clearing operations, but the company has not yet obtained a network clearing license. 

Visa applied for the license back in early 2018 and is still pending approval. 

After a decade of lobbying by foreign players seeking direct access to what is expected to soon become the world's largest market for bank cards, China is opening up its local currency payments market to foreign companies 

For New York-based American Express, the approval is welcome news. Spending on the company's cards in May was down from a year earlier in the mid-30 percent, after a decline of 45 percent in March. The company has set aside $2.6 billion in first-quarter loss provisions, while this year its shares have fallen by 18 percent.

China is committed to speeding up access to its market for card companies as part of the phase one U.S. trade deal signed earlier this year. It's been a long process since the nation opened to license foreign firms to end a state-run China UnionPay Co monopoly in June 2015. In February, Mastercard Inc. earned initial approval to develop its bank card clearing company in China, although progress for Visa Inc. has been sluggish.

The opening to card companies is part of a broader plan by China to give access to its markets, which also includes insurance, asset management, and investment banking. BlackRock Inc. and Goldman Sachs Group Inc. are among a bevy of firms that are preparing to pile in full bore to capture profits from China’s fast-growing wealth. 

American Express will face large domestic competitors and a well-developed market for mobile payments. Mobile transactions topped 190 trillion yuan (US$27 trillion) in China in 2018, making it the world’s largest such market, according to iResearch. Ant Financial’s Alipay and Tencent Holdings’s WeChat Pay are the dominant firms in this sector in China.

Share this article:

Leave a feedback about this



Join Group

Signup for Our Newsletter

Get Exclusive access to members only content by email