Why China’s Shift to Consumerism Will Benefit MasterCard and Visa


Mar. 28 2016, Published 2:18 p.m. ET

China’s shift to consumerism

The rise in consumer leverage in China should benefit global payment operators, foreign financial institutions, and credit institutions. Cars and consumer durables financing could soon shift. Cash transactions have dominated these purchases, but with increased consumerism in China, we may soon see increased use of credit to fund these purchases. Auto financing is already catching up in China.

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Last year, the PBoC (People’s Bank of China) issued a notice encouraging consumer credit and auto finance companies to expand further to rural areas. The government is encouraging more personal lending and durable lending, which should benefit overall non-card lending.

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Credit expansion in China

Authorities in China are sincerely attempting to promote increased consumer lending in the country. Considering that mortgages command a significant portion of overall consumer credit, the government cut the minimum down payment required for both first and second properties. It also relaxed the term of ownership required to qualify for business tax exemption when selling a house from five years to two.

Global players to benefit

China’s card-based lending market is dominated by the state-backed China UnionPay. China’s plan to open its domestic card-based consumer lending to foreign players should benefit global payment operators like MasterCard (MA), Visa (V), and American Express (AXP). Depressed global demand and shaky consumer confidence have taken a toll on these companies. The opening of China’s credit market to foreign players and the e-commerce boom could mean sunnier days for these US financial (XLF) companies.

HSBC (HSBC) and Citigroup (C) are among the top foreign banks in China providing credit services.


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