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China’s central bank delays market entry for Visa and Mastercard


The country’s central bank has refused to acknowledge applications submitted by Visa and Mastercard to process renminbi payments, despite 2017 rules that removed formal obstacles to foreign participation in the $124 trillion market after a decade-long struggle

The application delays highlighted complaints by overseas companies and White House trade negotiators that China had used informal barriers to block foreign competition in the domestic market, even where written rules had ostensibly guaranteed fair treatment. 

While Visa and Mastercard had submitted applications to the People’s Bank of China more than a year ago, it has not yet formally acknowledged these submissions, according to two people familiar with the application process.

The country’s refusal to process the applications could cause trouble in trade negotiations between Washington and Beijing, which are reaching a critical juncture ahead of a March 2 deadline to either strike a deal, or face new escalation in tariffs.

The US has been trying to secure greater market access for American financial services companies, along with other changes to Chinese economic policy, like curbing the forced transfer of technology.

The Office of the US Trade Representative, which is leading the talks, has not yet responded for a request for comment.

As with typical Chinese permissions processes, formal acceptance and acknowledgement is the initial step towards approval. According to the application procedure published in 2017, the central bank must decide on applications within 90 days of acknowledgment. 

“It’s a funny spin on World Trade Organization compliance. Yes, China will have due process for the application once they’ve accepted it, but no one ever thought it would be possible not to accept the application,” stated a source. 

In November, American Express became the first foreign card scheme to win initial approval from the central bank to establish a renminbi bank-card clearing company. Amex’s approval however, raised eyebrows because the new entity is a 50-50 joint venture with a Chinese partner, even though the rules permit wholly foreign-owned ventures.

In November 2017, Reuters had reported that China was pressuring Visa and Mastercard to operate through joint ventures. An executive at a major foreign card operator did say that the PBoC had not explained its refusal to process the company’s application.

 “One could suspect that it’s because of the trade war, but then again American Express was approved. Somebody said, ‘Well Amex is smaller, so there’s less impact to the market,’ but nobody really knows,” he said. “There are a lot of variables. We are communicating with the central bank on and off, but there’s no clear reason.” 

Visa, Mastercard and the PBoC did not answer requests for comment.

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