Guo Ye, China corporate communications officer of Citibank, said her bank is eagerly waiting for a revised banking card management regulation, which will allow foreign banks issue banking cards to individuals on the Chinese mainland.

"We will try to be the first group of foreign banks to be approved by the banking authorities to conduct this business," she said.

Other banks, such as Hong Kong and Shanghai Banking Corporation Ltd and Standard Chartered, are also preparing to apply for the right to take part in this business.

Reports on the revised regulation which allows foreign banks to enter the banking card business have frequently been seen since the beginning of this year in the domestic media - some said the new regulation would be announced in April, while others said it will be announced in July.

An official with the People's Bank of China, the central bank, said the new regulation would not be published very soon, but declined to give a timetable.

"We are busy conducting institutional reforms," said one official, referring to the creation of the China Banking Regulatory Commission (CBRC).

But a CBRC official said the new regulation was likely to come out this year.

"A number of regulations concerning the banking industry will become effective in the second half of this year," he said.

Huang Jinlao, a senior researcher with the International Financial Institute, said competition for bank card business, mainly the credit card business, would intensify in the coming years.

Foreign banks will be freed from all geographical and customer restrictions in China by the end of 2006, he said.

"Foreign banks, which enjoy global networks and technological advantages, could pose a considerable threat to domestic banks in retail banking," Huang said.

Foreign banks are likely to firstly target white-collar workers and the rich, he said.

Wang Zhao, a researcher with the Development Research Centre, said the credit card business is one of the most profitable areas.

He said that the credit card business can help bankers increase revenues through three channels - annual fees, high interest rates and commissions of at least 2 percent paid by merchants to card issuers.

Domestic banks should try to secure their foothold in the market, he said.

Li Jinhui, an official at the Shenzhen-based China Merchants Bank said the mass market was the important area for domestic banks.

China Merchants Bank's All-in-One Card is one the most popular banking cards, surveys have shown. The bank issued its first credit card last December.

Most of the popular banking cards, mainly debit cards, are issued by the "Big Four" State-owned banks and 10 major shareholding commercial banks.

By the end of last year, 88 domestic banks, including many city-based banks, have issued about 500 million bank cards, an increase of 30 percent from 2001.

Most of them have joined the China UnionPay, a payment system serving card issuers.

The network is expected to expand and will make it more convenient for Chinese bank card holders to conduct cross-bank transactions, said Wan Jianhua, president of China UnionPay.

He estimated that China's middle class population could reach 200 million by 2010. This reflects the massive scope for growth in the credit card business.

Albert Shiung, general manager of China operations for Visa, one of the world's leading credit card companies, said this year will mark a turning point in the development of China's credit card sector.

"Business will see a breakthrough in 2003, as a number of domestic banks are set to accelerate the business this year," he said.

Credit card use is expected to grow by 10 times, to more than 10 million customers, in China within five years, he said.

"Although still very slim in terms of our global portfolio, China has already become one of the most important strategic markets for Visa, given the huge potential in the market," Shiung said.

The transaction volume in China of Visa's foreign exchange cards jumped six times in 2002 compared with 2000, he added.

"Intensified cross-border business and travelling could create new incentives for growth in the use of China's bank cards," Shiung added.

Some 590,000 Visa-branded banking cards that can be used internationally had been issued in China by the end of last year.

The cards were used for transactions worth US$415 million, up 96 percent from 2001.

China's booming outbound travel industry will play a vital role in boosting the growth of China's bank card sector, Shiung said.

(China Daily June 30, 2003)