TIMES.KY

Cayman Islands, Caribbeanand International News
Thursday, Mar 28, 2024

American Express: new yuan card settlement network promotes global use of China’s currency

American Express: new yuan card settlement network promotes global use of China’s currency

Beijing’s decision to let American Express join national clearing network will boost the yuan’s circulation and its role in global finance, analysts say. The move has the added benefit of reducing China’s reliance on the US dollar payments system as bilateral relations between Washington and Beijing deteriorate
American Express’ entry into China’s US$27 trillion payment market may help increase the use of the yuan across borders amid worsening US-China tensions, according to analysts.

Since last week, Chinese commercial lenders Minsheng Bank, Guangfa Bank, Ping An, Shanghai Pudong Development Bank and China Merchants Bank have launched American Express cards whose bills can be paid in yuan both inside and outside China. Previously, offshore card transactions were allowed to be settled only in foreign currencies.

The joint venture between American Express and LianLian DigiTech, called Express (Hangzhou) Technology Services, obtained approval in June from China’s central bank for a network clearing license, making American Express the first foreign company allowed to settle yuan-denominated credit card transactions both abroad and on the mainland.

The clearing of card transactions refers to the settlement of transactions and the transfer of funds from one bank to another, and by a bank to a merchant that accepts the card when someone uses it to make purchases.

Beijing’s decision to let the American company participate in its clearing network will help channel more yuan funds abroad, boosting the yuan’s circulation and its role in global finance, analysts said. The move has the added benefit of reducing China’s reliance on the US dollar payments system amid worries that the United States could try to impose financial sanctions on the country because of deteriorating bilateral relations.

“If Chinese consumers can go to other countries, and their payments there can be cleared in yuan, then this would increase the use of the yuan and help with its internationalisation progress,” said Nathan Chow, senior China economist at DBS Bank. “The move is also a signal that China is not sanctioning the businesses of American companies, despite tensions.”

The People’s Bank of China (PBOC) has also approved an application by Mastercard’s China joint venture to conduct bank card clearing operations in the country, but the US credit card company has not yet received a yuan network clearing license. Rival card giant Visa submitted its application in early 2018 and is still awaiting approval.

China aims to integrate its domestic payment services into the world’s financial system to create a global yuan clearing and settlement system for trade and investments. The development of domestic bank card firm Union Pay, as well as mobile payments apps from Alibaba’s Alipay and Tencent’s WeChat, have lowered the costs and increased the convenience of using the yuan. Alibaba owns the South China Morning Post.

“I’m already used to making purchases through mobile payments. Even when you go to Thailand for fun, it has been easy to pay with Chinese apps at the convenience and drug stores there,” said Cat Xiong, 32, who works in the social studies education sector in southern China.

American Express said the bank card clearing network, being built by the joint venture, will process both online and offline payment transactions, and the company will cooperate with leading Chinese mobile wallet service providers, according to a statement in June.

Its advantage lies mainly in its expansive cross-border international network that can accommodate both Chinese travelling abroad and foreigners visiting China, analysts said.

“American Express is trying hard not to miss the second boat in China. They already did with the first wave as China blocked foreign credit card providers and developed Union Pay, followed by Alipay and WeChat,” said Alicia Garcia Herrero, chief economist for Asia-Pacific at French investment bank Natixis.

Morgan Stanley chief China economist Robin Xing Ziqiang said that after the slow progress in yuan internationalisation in recent years, it has again become a priority for Chinese policymakers to increase use of the yuan in light of the emerging post-coronavirus “multipolar world” resulting from geopolitical tensions.

The ratio of China’s foreign-related transactions conducted in yuan, excluding transactions via the Stock Connect and Bond Connect market-access initiatives, has surpassed its peak recorded in 2015. And the yuan’s share in international foreign exchange reserves passed 2 per cent in the first quarter, doubling from 2015, largely supported by the Russian government’s purchases of Chinese government bonds, Xing said.

Herrero cautioned that the growing sophistication of Chinese financial institutions did not necessarily mean that the yuan had reached a tipping point to become a fully fledged reserve currency. The hurdle to yuan internationalisation comes from getting sovereign wealth managers, merchants and consumers to accept the currency without China lowering its restrictions on capital flows while making the yuan freely convertible.

Ahead of the six-month review of the phase one trade deal by senior US and Chinese trade officials, PBOC governor Yi Gang said last weekend that China would fulfil its financial opening-up pledges agreed to in the deal, such as by allowing Wall Street’s trading houses to have wholly-owned brokerage and fund-management operations in China.

Some of China’s much-delayed financial opening-up measures were promised two decades ago as conditions for China’s entry into the World Trade Organisation in 2001.

“It is certainly a breakthrough for a foreign company to gain entry into the previously untouchable Chinese payment market,” said Allison Malmsten, a market analyst at Daxue Consulting. “It goes against the anti-globalisation direction of the Trump administration and represents the will of companies to collaborate across borders – creating an opportunity for finances to flow between the two countries.”
Newsletter

Related Articles

TIMES.KY
0:00
0:00
Close
Paper straws found to contain long-lasting and potentially toxic chemicals - study
FTX's Bankman-Fried headed for jail after judge revokes bail
Blackrock gets half a trillion dollar deal to rebuild Ukraine
Israel: Unprecedented Civil Disobedience Looms as IDF Reservists Protest Judiciary Reform
America's First New Nuclear Reactor in Nearly Seven Years Begins Operations
Southeast Asia moves closer to economic unity with new regional payments system
Today Hunter Biden’s best friend and business associate, Devon Archer, testified that Joe Biden met in Georgetown with Russian Moscow Mayor's Wife Yelena Baturina who later paid Hunter Biden $3.5 million in so called “consulting fees”
Singapore Carries Out First Execution of a Woman in Two Decades Amid Capital Punishment Debate
Google testing journalism AI. We are doing it already 2 years, and without Google biased propoganda and manipulated censorship
Unlike illegal imigrants coming by boats - US Citizens Will Need Visa To Travel To Europe in 2024
Musk announces Twitter name and logo change to X.com
The politician and the journalist lost control and started fighting on live broadcast.
The future of sports
Unveiling the Black Hole: The Mysterious Fate of EU's Aid to Ukraine
Farewell to a Music Titan: Tony Bennett, Renowned Jazz and Pop Vocalist, Passes Away at 96
Alarming Behavior Among Florida's Sharks Raises Concerns Over Possible Cocaine Exposure
Transgender Exclusion in Miss Italy Stirs Controversy Amidst Changing Global Beauty Pageant Landscape
Joe Biden admitted, in his own words, that he delivered what he promised in exchange for the $10 million bribe he received from the Ukraine Oil Company.
TikTok Takes On Spotify And Apple, Launches Own Music Service
Global Trend: Using Anti-Fake News Laws as Censorship Tools - A Deep Dive into Tunisia's Scenario
Arresting Putin During South African Visit Would Equate to War Declaration, Asserts President Ramaphosa
Hacktivist Collective Anonymous Launches 'Project Disclosure' to Unearth Information on UFOs and ETIs
Typo sends millions of US military emails to Russian ally Mali
Server Arrested For Theft After Refusing To Pay A Table's $100 Restaurant Bill When They Dined & Dashed
The Changing Face of Europe: How Mass Migration is Reshaping the Political Landscape
China Urges EU to Clarify Strategic Partnership Amid Trade Tensions
Europe is boiling: Extreme Weather Conditions Prevail Across the Continent
The Last Pour: Anchor Brewing, America's Pioneer Craft Brewer, Closes After 127 Years
Democracy not: EU's Digital Commissioner Considers Shutting Down Social Media Platforms Amid Social Unrest
Sarah Silverman and Renowned Authors Lodge Copyright Infringement Case Against OpenAI and Meta
Italian Court's Controversial Ruling on Sexual Harassment Ignites Uproar
Why Do Tech Executives Support Kennedy Jr.?
The New York Times Announces Closure of its Sports Section in Favor of The Athletic
BBC Anchor Huw Edwards Hospitalized Amid Child Sex Abuse Allegations, Family Confirms
Florida Attorney General requests Meta CEO's testimony on company's platforms' alleged facilitation of illicit activities
The Distorted Mirror of actual approval ratings: Examining the True Threat to Democracy Beyond the Persona of Putin
40,000 child slaves in Congo are forced to work in cobalt mines so we can drive electric cars.
BBC Personalities Rebuke Accusations Amidst Scandal Involving Teen Exploitation
A Swift Disappointment: Why Is Taylor Swift Bypassing Canada on Her Global Tour?
Historic Moment: Edgars Rinkevics, EU's First Openly Gay Head of State, Takes Office as Latvia's President
Bye bye democracy, human rights, freedom: French Cops Can Now Secretly Activate Phone Cameras, Microphones And GPS To Spy On Citizens
The Poor Man With Money, Mark Zuckerberg, Unveils Twitter Replica with Heavy-Handed Censorship: A New Low in Innovation?
Unilever Plummets in a $2.5 Billion Free Fall, to begin with: A Reckoning for Misuse of Corporate Power Against National Interest
Beyond the Blame Game: The Need for Nuanced Perspectives on America's Complex Reality
Twitter Targets Meta: A Tangle of Trade Secrets and Copycat Culture
The Double-Edged Sword of AI: AI is linked to layoffs in industry that created it
US Sanctions on China's Chip Industry Backfire, Prompting Self-Inflicted Blowback
Meta Copy Twitter with New App, Threads
The New French Revolution
BlackRock Bitcoin ETF Application Refiled, Naming Coinbase as ‘Surveillance-Sharing’ Partner
×