The Chinese, a people accustomed to saving for a rainy day or for brighter future, once regarded buying on credit an extravagance. The public in general viewed with skepticism the idea of using a credit card or of paying for something in installments.

The first credit card appeared in 1979 in China after the Bank of China Guangdong Province Branch inked an agreement with Hongkong-based Bank of East Asia on handling the East Asia Bank Americard/VISA. The first Chinese credit card was issued in March 1985 by the Bank of China Zhuhai Branch. The Bank of China headquarters in Beijing later replaced all of its branch credit cards with the Great Wall credit card, first issued in June 1986.

At that time, a possession of a credit card was considered a symbol of wealth and status. Some people even cheated on their credit card applications just to get a card as a status symbol. Even 15 years later, in a survey done by Master Card and China Women News in several major Chinese cities, around 10 percent of people said that holding a credit card contributed to their feelings of self-esteem.

Over 50 percent of people surveyed said they applied for a credit card for its convenience and security. Statistics from the People’s Bank of China, the central bank, indicated that by June this year, 55 authorized financial institutions altogether issued 330,000,000 bank cards, many of them debit cards accounting for some 374.2 billion yuan in saving balances.

The financial institutions have established 49,000 Automatic Teller Machines (ATMs) and 33,400 credit card readers at various locations, and otherwise have made agreements for credit card use with around 100,000 department stores, hotels and restaurants. From January to June, the central bank recorded 4853.2 billion (about US$6.03 billion) yuan in card trading volume.

“The bank card has been an indispensable payment tool in China’s economic life,” Wu Xiaoling said in a Credit Card Development International Seminar with Visa International in June, “But the bank card issued by Chinese banks are mostly debit cards which cannot overdraft but are limited in use to a holder’s savings.”

In the same survey by Master Card and China Women’s News, nearly 60 percent of those interviewed said the troublesome application procedure was an impediment to getting a credit card, and 56.3 percent complained about the inability to overdraft a debit card while credit cards are as yet far from being widely accepted anywhere in China.

From the start of the bank card business, the 55 financial institutions authorized to issue credit cards adopted different standards in transferring and reading information from ATM and card readers. Therefore, card holders had to use their cards at specific ATMs or card readers, among the total 49,000 and 33,400 units (a very low figure for a population of 1.3 billion). Card holders then turned to getting cards from different banks, which inflated the number of cards used to 330 million, with bank cards designated to specific purposes, like a salary card from a company, a traffic fine card from the traffic administration and water and power payment card from property management departments – all cards destined useless for daily use.

The four state banks -- the Bank of China, the Industrial and Commercial Bank of China, the Bank of Construction and Agricultural Bank of China-- hold an overwhelming stake in the credit card business. They are responding reluctantly to the State Council’s “Gold Card” campaign begun in 1993 to connect bank credit card networks and unify credit card operations since that not only grants competitors an equal footing but also will cost them a lot to replace their old-standard cards, which currently earn great profit and hold up a major market share.

With the Gold Card campaign, most credit cards are connected in 16 of China’s 31 provinces and center cities -- Beijing city, Shanghai city, Tianjin city, Guangdong province, Shandong province, Jiangsu province, Shenzhen Special Economic Zone, Fuzhou city, Hangzhou city, Shenyang city, Wuhan city, Kunming city, Dalian city, Xiamen city, Qingdao city and Haikou city.

But Nie Shu, vice director of Bank Card Administration under the People’s Bank of China, cautioned that in the above-mentioned cities, card operations in different bank networks is far from satisfactory. Even in the most affluent Guangdong Province that neighbors Hongkong, the successful rate of such an operation is under 92 percent. The State also falls short of a national law on defining rights and responsibilities of the banks and card holders in operations between banks.

Restrictions in drafting further drain popularity. Taking the Peony Smart Card from the Industrial and Commercial Bank of China as example, the card with the biggest circulation of 50 million. It is limited in drafting only three times and a tiny total of 5000 yuan (US$ 615) per day. Another restriction allows the user to put in the wrong password only two times before it swallows the card on the third try. The user then is required to provide ID, give bank account information and pay a fee to get a new card from the branch that issued the former card.

In the same credit card development seminar with Visa International, the vice governor of the central bank, Wu Xiaoling stressed that by January 2004 bank card networks must be connected among big and medium-size cities nationally and non-connected bank card will be restricted to only city or regional use. By the end of 2002, all ATMs and card readers must be updated for all connected bank cards. And connected bank cards are required to add a “banks connected” signal that trade insiders consider as a sign of competition with Visa and Master Card.

“We will learn from foreign banks’ successful experience, accelerate legitimate standards for connected bank card business, unify operational procedures and connection standards, and tighten supervision to ward off risks,” Wu Xiaoling said.

(china.org.cn by Alex 09/18/2001)