1 February 2006
China is running out of time to establish a national payment card network before the Beijing 2008 Olympics, a Monash University researcher has warned.
Professor Steve Worthington (pictured), from the Department of Marketing, said China's cash-centric economy made the creation of a harmonious banking network a huge challenge for the government.
Professor Worthington has completed the only comprehensive up-to-date analysis of the size, structure and medium-term development of the Chinese cards market.
"Historically, the interbanking network has been poor -- a card from one bank often could not be used in a point-of-sale terminal or ATM operated by another bank," Professor Worthington said. "Things have improved, but there's still a long way to go."
Even though China's total card issuance ranked second only to the United States, it was not usual for the Chinese to use debit or credit cards for retail transactions, Professor Worthington said.
"As at March 2005, 827 million payment cards had been issued in China , for a population of 1.3 billion. However the majority were unused debit cards, and only 10 million were credit cards. In comparison, there are 12.5 million credit cards in Australia, for a population of only 20 million.
"Saving is very much a part of the Chinese culture -- they view borrowing as a sign you're living beyond your means. The Chinese tend to pay in full, in cash - even for items like houses and cars," he said.
The household savings rate in China is almost 40 per cent, compared with minus 1 per cent in Australia.
Professor Worthington said the Chinese government was aiming to increase the use of payment cards for retail sales from 3 per cent to 30 per cent by the 2008 Olympics.
"It's the chicken and egg conundrum -- why would banks provide more terminals and ATMs when people don't have payment cards, and why would people get payment cards if they know they can rarely use them?" Professor Worthington said.
"There are quite a few ATMs in China , from which tourists can withdraw money. Major hotels and restaurants will accept international cards, but many local shops and cafes don't accept any cards.
"Thousands of people will be converging on China in less than three years. It will be extremely embarrassing for the government if tourists are unable to use their debit and credit cards."
Professor Worthington has written an article on this topic for the latest edition of the
Monash Business Review
.
For further information contact Professor Worthington on +61 3 9903 2754 or 0421 399 018 or Ms Natasha Whalley, Media Communications on +61 3 9905 9201 or 0437 458 457.
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