WHEN an Industrial and Commercial Bank branch in Shanghai introduced personal cheques to overseas Chinese and individuals of high net worth a decade ago, the practice did not catch on. Because they were used by a select few, shops, restaurants and department stores did not bother to set up an efficient administrative apparatus to handle them. The result was that using personal cheques to pay for goods and services was more cumbersome than the inconvenience and risks of carrying around huge piles of money wrapped in newspapers. As shops and restaurants frowned on cheques, the form of payment was a rarity. 'Personal cheques are more a hindrance than a convenience as shops and restaurants in China are not used to them,' said Xue Qingyu, head of Shanghai Pudong Development Bank's Xuhui branch. 'That is although enterprises have used them for a long time.' A random check with four major department stores - Oriental, Wing's, Pacific and Shanghai No. 1 - showed that only Oriental had one experience of clearing a personal cheque. The rarity of personal cheques could be summed up by Yuan Guohua, section chief of Pacific Department Store's finance department: 'Up to now, we have not seen a personal cheque used.' That is about to change. A few days ago, Shanghai became the first city in China to introduce personal checking accounts in a big way to ordinary account holders. The People's Bank of China (Shanghai) - the city's financial watchdog - has approved 32 branches of Chinese banks to carry out the experiment in consumer banking. 'The banking reforms have not focused much on the consumers. Now, by introducing personal cheques, it will create another level of convenience in retail banking,' said Douglas Watt, Price Waterhouse's Beijing-based partner in banking regulation. To make it easy for consumers, the People's Bank stipulated that a minimum of 5,000 yuan (HK$4,600) must be deposited in a personal checking account. And a cheque can only be made out for at least 100 yuan. Post-dated cheques are banned and those who issue bounced cheques will be fined. A relaxation of the requirements, in theory, should widen the use of personal cheques. But analysts said given the general aversion to this form of payment, there was a need to educate consumers, merchants and retailers on the benefits of cheque payment. 'The question here is, will shops accept them readily. That will hold the key to its popularity,' said Mr Watt. The Shanghai People's Bank said educating the public and retailers on accepting personal cheques should not prove difficult. 'The introduction of personal cheques is merely an extension of the enterprise checking account system. So it should not be a major problem,' said Qian Min, an official of the Shanghai PBOC accounting department. But analysts said there were bound to be teething problems. Some department stores, for example, feared that more conflicts would arise with customers, who paid in cheques but demanded immediate delivery of goods. 'We usually deliver goods three days later if cheques are used so that we can verify these bills, but customers may not like that,' said Zhou Zhongqi, manager of Oriental Department Store's accounts department. Cheques used on a large scale could slow down the delivery to five days. In some cases, shops only delivered the goods after 10 days. More importantly, in case of bounced cheques, is who should be held legally responsible. 'The legal system is not well developed to handle these disputes. And if the volume of cheques used increases sharply, the clearing and settlement system may be bogged down,' said a banking expert. The widespread use of personal cheques would thus create another level of risk for the banks and the retailers. 'As a retailer or a merchant, I will have to find out who bears the risks of a bounced cheque. This is in addition to the administrative procedures the retailers have to set up to verify the cheques,' said Mr Watt. Next January, the Law on Negotiable Instruments passed in May will come into effect. The law sets out the legal rights of cheque issuers, recipients and financial institutions. The central bank seemed determined to ensure that cheques would become as popular as cash in China, and said steps were being taken to improve the bank clearing system. 'The promotion of cheque usage will reduce the circulation of cash, simplify the procedures of clearing and payment, and offer convenience for consumers,' Xie Zhong, an official with the central bank, pointed out. Mr Xie was quoted by China Daily as saying the central bank had asked commercial banks to provide good services to promote the use of cheques. He was confident that with the growth of private business, a sharp rise in people's incomes and the changing consumption patterns, cheques would become popular in a short time. Analysts tended to agree. 'All modern economies accept cheques,' said Mr Watt. 'And I'm sure China would also have to go through this process,' said Mr Watt. The Chinese consumers, like those elsewhere, are keen on convenience.