The People's Bank of China (PBC), the country's central bank, will directly oversee electronic payment businesses and grant licenses for related service providers, participants at a seminar held in Beijing on August 19 were quoted in Monday's China Business.

"The seminar reached two consensuses: that third-party payments, including e-payments, should be classified as non-banking financial business of payment organizations and supervised by the central bank; and that the central bank will issue licenses for market entry," an anonymous source was reported as saying.

The bank's Department of Payment and Clearing publicized a draft on June 10 to solicit opinions, and the seminar was to pave the way for the official promulgation of the Management Regulation on Payment Organizations.

The details are not yet available, but the final version is expected to be released in the next a few months.

Currently, many e-payment service providers, including the giant e-Bay and Taobao.com, don't need to register with the central bank.

"Paypal, an affiliate of e-Bay, runs its business with approval from financial watchdogs in the US and EU, but it has conducted operations in China since July 11 after cooperating with Shanghai Wangfuyi Technology Co., Ltd, which only has an internet content provider license," one participant said.

The draft stipulated that foreign investors can co-invest in China's payment organizations with local partners, but their stakes are restricted to below 50 percent.

Registered capital, cash deposits and risk-resistance would be key criteria for companies to gain e-payment licenses. The draft proposed that national payment organizations must have a minimum of 100 million yuan (US$12.3 million) registered capital, regional organizations 50 million yuan (US$6.17 million) and local organizations 10 million yuan (US$1.23 million).

Some participants complained that 100 million yuan (US$12.3 million) registered capital was too high for small- and medium-sized enterprises and would hurt the booming e-commerce sector. But others worried that too-low registered capital requirements would bring huge financial risks.

It is difficult to supervise e-payments since authenticity and legitimacy of online transactions are hard to guarantee; business registration and tax collection are also big problems.

Some banks have to raise cash deposits to prevent fraud. The Industrial and Commercial Bank of China, one of the "Big Four" state-owned banks, stipulates that e-payment service providers must transfer 30 percent of transaction volume from the previous month to their cash deposit accounts. If companies terminate their operations, the bank said it would inform clients immediately.

Backgrounder:

Aug. 28, 2004  the Standing Committee of the 10th National People's Congress passed the Law on Electronic Signatures.

Jan. 8, 2005  the State Council promulgated Opinions on Accelerating the Development of E-commerce to boost e-commerce and online payment and settlement services.

Jun. 10, 2005  the central bank's Department of Payment and Clearing published the draft Management Regulation on Payment Organizations to solicit public opinion.

Jul. 21, 2005  the China Internet Network Information Center reported in its annual survey that China now has over 103 million internet users and nearly 20 percent of them have shopped online at least once. Online trade volume in the first half of the year was estimated at 10 billion yuan (US$1.23 billion), with nearly half of that paid online.

(China.org.cn by Tang Fuchun September 2, 2005)