The Chinese government has been a stiff regulator of American banks in China, requiring US-based banks to work with Chinese banks when issuing loans and consumer lending products to Chinese consumers. Recently, however, the Chinese government eased restrictions on competition, allowing Citi, an American bank, the first entry into sole-branded credit cards.
Chinese company UnionPay will process the credit cards, while the cards will also be accepted abroad and serviced by MasterCard. The card company said in a statement that it intends to release credit cards denominated in both the local currency – the Chinese Renminbi – and the US dollar. Consumers will have a choice in their payment options, though it is likely most will choose to use a Renminbi-denominated account in China, and a US Dollar-denominated account overseas.
MasterCard said in a 2010 report that China could be the largest credit card market in the world by 2020, making it larger than the current largest market, the United States. Citi won the right to issue cards in China in February 2012, and analysts say that it may need to court as many as 20 million Chinese consumers for the effort to be profitable.
Growth in the credit card industry in the US remains to be seen. Still shellshocked by an on-going slow economic recovery, consumers are paying down their credit card balances to reduce their interest charges. A growing Chinese economy makes for a perfect place to launch a new credit card business. Citi will join other local Chinese banks and state-owned lending facilities in pushing cards to a growing Chinese middle class.