On 6 February 2012, Citigroup announced that it had received official approval from the China Banking Regulatory Commission (CBRC) to launch a proprietary credit card business in China. The business will cover both retail and commercial cards, and is likely to be launched later this year. On 19 March, Citigroup sold its stake in Shanghai Pudong Development Bank, which had been Citigroup’s co-branded credit card partner, for 4.2 billion yuan (approximately $665 million).
The CBRC’s decision may signal China’s increased willingness to open up the credit card business to foreign financial institutions. If so, it represents a very significant change. Previously, Hong Kong-based Bank of East Asia was the only non-mainland institution issuing non-cobranded credit cards in China. Bank of East Asia launched that business in 2008, having taken advantage of the special rights accorded to qualifying Hong Kong-based institutions, under the “Mainland and Hong Kong Closer Economic Partnership Arrangement” (CEPA), to set up branches or subsidiaries in China and conduct Renmimbi-based business there.
Other institutions, including Hong Kong-based banks that do not qualify to take advantage of CEPA, remain subject to the “Notice of the China Banking Regulatory Commission on the Issues Concerning Wholly Foreign-funded Banks and Chinese-Foreign Joint Ventures in Conducting the Bank Card Business,” promulgated in 2007. Under this Notice, foreign-funded banks are allowed to apply for a bank-card business permit, but until recently approvals have been slow and rare. Accommodating to this regime, in addition to Citigroup’s arrangement with Shanghai Pudong Development Bank, which dated from 2003, HSBC set up a credit-card joint venture with Bank of Communications Ltd in 2009, and in October 2011, Bank of China and American Express announced the issuance of a Bank of China Private Bank American Express(R) Card, Bank of China’s first credit card designed for private banking customers.
Although Citigroup will now be permitted to issue its own credit cards, all transactions on the cards will be processed through China Unionpay Data Co., China’s largest electronic payment network, rather than through a foreign-owned network such as Visa. We will report further as this regulatory regime evolves.