According to the report "E-payment and the Chinese Economy"
released by the Finance Institute of the China Academy of Social
Sciences (CASS), banks are lumbered with about 2.1 billion yuan
(about US$260 million) in unpaid credit card bills, up to 90
percent of which is a result of malicious overdraft from as far
back as 1995.
Research for the report was conducted by the CASS, the People's
Bank of China (PBC),
and Industrial and Commercial Bank of China (ICBC).
A seminar was held in Beijing on November 21 to discuss the
findings of the report. Representatives from the PBC, China Banking
Regulatory Commission (CBRC), Ministry of
Finance, National Development and Reform Commission (NDRC), domestic third-party
payment system providers and international credit card
organizations attended the seminar.
Li Yang, director of the Finance Institute of the CASS, said
this is the first report that explains and analyzes the
relationship between the forms of electronic or cashless payment
and the Chinese economy. According to the report, China's credit
card industry differs from the West's in three main ways: national
coverage, usage, and overdrafts.
Individual consumer loans account for 2 to 3 percent of total
credit loans given in China, while credit card loans generated by
usage is even less.
"The establishment of an individual credit rating system is the
prerequisite for the development of a credit card industry," a bank
source told National Business Daily on November 21.
According to the report, the absence of a sound credit rating
system results in a bank having to expend more resources
investigating individuals, and insisting on guarantors with stable
incomes. The sometimes cumbersome procedures ironically tend to
attract those with low credit ratings, resulting in higher
incidences of non-payments.
To avoid this, many banks have taken to issuing debit cards
instead. Debit cards might present lower risks for banks, but they
have also retarded the development of the credit card industry.
(China.org.cn by Zhang Yunxing November 28, 2005)