U.S. Card Companies Shrug at China’s Monopoly
The U.S. government is pressing China to end a state monopoly over its booming payment-card business and open it to foreign competition. One group that appears less enthusiastic about confronting that monopoly: some of the very U.S. credit-card companies that Washington’s lawsuit aims to help. The U.S. Trade Representative’s Feb. 11 decision to ask the World Trade Organization for a dispute-settlement panel in its electronic-payment case against China is the culmination of a decadelong effort to crack open the local market for companies like MasterCard Inc., Visa Inc. and American Express Co.
The U.S. lawsuit targets China UnionPay Co., a nine-year-old company controlled by China’s central bank that has managed to dominate the business of processing local-currency credit-card and debit-card payments in China, despite promises that China would open it up as part of its entry into the WTO. UnionPay also has been expanding internationally into markets the foreign companies dominate.
But the U.S. Trade Representative’s effort has drawn almost no public backing from the U.S. card companies. Industry executives and lawyers say the companies are wary that overt support will upset UnionPay, which is their partner and sometime regulator in China. Companies fear that public criticism of the Chinese government or the companies it owns could make them vulnerable to rivals that cooperate more with the government and jeopardize their futures in a market that could have 1.1 billion credit cards by 2025, according to some industry projections.
“It’s well known that China punishes whistleblowers,” says Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, a Washington think tank.