The PBOC-backed 'Payments Clearing Association of China' published its annual report in May. We talked about some of the digital payments statistics from the report in our previous commentary, but the report also features ranking for China acquiring market, which is even more significant because such data has never been officially published before.
On May 6th, the People’s Bank of China (PBOC) changed its policy for investors in the interbank bond market. These modified regulations will open up the market to new types of investors including asset managers, housing provident funds, pension funds and charities.
The Annual Payments Report by the Payment and Clearing Association of China was published on May 19th and showed the continuing growth in payment transactions in China. The total amount of online payments reached RMB 2,042 trillion, spread between commercial banks and payment service providers (PSPs).
Although China’s newly issued April export/import data may be worrying on its face, when examined from a different angle, it may tell a more positive story.
The long expected payment system of smartphone producer Xiaomi has finally entered the market. By cooperating with China’s dominant card-payment processor China UnionPay, users can now make purchases by using their phone and Xiaomi Pay through China UnionPays’ Quickpass system. The company’s latest offering comes as the third-party mobile payment market continues to grow tremendously. According to research firm Analysys Mason, the market valuation was set at 16 trillion yuan in 2015. This has attracted not only Chinese companies such as Huawei and Xiaomi, but foreign companies, as well.
In China this year, over 3,700 billion RMB (about 570 billion USD) worth of domestic debt will expire, a record-breaking amount. Many companies will face difficulty in rolling the debt over because of the limited size of the whole bond market. Even if just a small percentage of the whole market defaults, the amount defaulting would still be so large, it could start a crushing storm for an already vulnerable Chinese economy. Many defaulting state-owned companies are from sectors in difficulty as China slows, such as mining and heavy industry. This makes the possibility of default more likely to happen. And in the environment of a slowing debt market, things will probably get worse.
Shanghai Gold Exchange started trading a new gold contract on April 19th. The contract is meant to become a global benchmark similar to the gold fix originated in London and New York, but denominated in RMB.
There's a clearing platform in development that might change the playing field of the payments industry in China. The Payment and Clearing Association of China had a member congress in April and has approved a proposal to build an Internet payment clearing platform for non-bank payment institutions.
China’s fintech sector has enjoyed significant development, but has recently been constrained by more active regulators who have increased their rate of regulation to try and stay ahead of the industry development. After two years of planning and industry development, a public-private body was established by the People's Bank of China - the National Internet Finance Association.
A tightening regulatory policy towards third party payment has driven China's payment industry into a period of consolidation and M&A. For some, this has been a great opportunity to get into other segments of the market like O2O (online to offline). We saw this in 2015 when Wanda bought 99bill. This time it's Lakala with a help of with a company called ‘Tibet Tourism.’