Requirements, standards fair, uniform for foreign firms: analysts
China's recent green light for American Express Co (AmEx) to set up a card payment network in the Chinese mainland market is in line with China's broad efforts to open up the massive domestic market for more foreign financial institutions at its own pace and bring more fresh forces into the market, analysts said on Monday.
While all foreign financial institutions will face the same procedures and requirements in applying for licenses for settling card payments in the mainland, AmEx also represents a newcomer in the market, where other companies such as Mastercard Inc and Visa Inc already have a considerable presence, analysts noted.
In a major step for China's financial opening drive, the People's Bank of China (PBOC), approved the application of Express (Hangzhou) Technology Services Co, a joint venture between AmEx and Chinese fintech company Zhejiang Lianlian Group, for payment clearing services in the mainland.
The move, which followed many opening measures by Chinese regulators, essentially makes AmEx the first foreign financial institution to gain an approval to operate in the potentially lucrative Chinese mainland payment market, beating rivals Mastercard and Visa, which have also submitted applications for the payment services with the PBOC, according to media reports.
The approval of AmEx's application also sparked some questions regarding China's approval procedures as well as its requirements and standards. Analysts noted that AmEx's win merely illustrates that the company has strictly followed procedures and rules and meets all the previously established standards that apply to all applicants.
"Some people might read too much into why AmEx is the first to win such an approval rather than other companies such as Mastercard and Visa. It is very simple. One has to be the first and whoever meets all the requirements will get to be the first," said Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology.
Dong said that "under the previously announced rules and requirements, all companies should be treated equally and fairly."
Li Daxiao, chief economist at Shenzhen-based Yingda Securities, added that China has been mulling the opening-up of the payment market for years and spent a lot of time in establishing relevant rules and standards. "All those efforts were not taken just to allow one company to operate in the market. These are well-thought moves to ensure a smooth opening-up," he said.
China has announced many policy directives in recent years with regard to the opening of the domestic payment system. In June 2017, the PBOC issued a detailed guidance for foreign institutions to apply for payment licenses, officially opening the domestic payment market for foreign companies.
Following these announcements, AmEx, Mastercard and Visa all submitted applications, but applications of the latter two are still pending. Mastercard has set up joint ventures with Chinese companies in connection with the application, while Visa has set up a wholly owned subsidy in the mainland, said media reports.
"Mastercard and Visa already have a huge presence in the Chinese market, so their applications might take longer time to process as regulators need to weigh on other aspects of their application. AmEx has a relatively small presence and requires less time to go through its application," Dong said.
Another possible consideration might be that regulators want more foreign companies to participate in the Chinese payment market to ensure diversity and bring fresh expertise to help reform and further opening-up, analysts pointed out.
"While AmEx is one of the leading companies, it has a very small presence in China. So giving a newcomer such an opportunity is a good thing for the Chinese market," Dong said.
The move to welcome a newcomer is also in line with China's push for broader opening-up. "This shows that China welcomes more foreign companies to operate in the Chinese market," he said.
