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Christine Chan

China Merchants Bank has announced plans for the mainland's first mass credit-card campaign - signalling the start of aggressive competition for customers in the infant market.

Unlike previous card promotions - which targeted only tens of thousands of customers - the bank's latest campaign aims to issue up to one million cards in the first year, according to initial estimates.

At the end of September this year, an estimated 469 million bank cards were in circulation in China - largely debit cards. Of those more than 500,000 are credit cards that can be used internationally.

The Shenzhen-based bank is the country's sixth-largest commercial lender and the largest of the four mainland listed banks.

Guangdong Development Bank, Bank of China and China Construction Bank have issued credit cards in China - all restricted to a single currency - either yuan or the US dollar.

China Merchants' credit cards will be valid for use in China and abroad.

The cards may be freely used in the mainland without any yuan deposits to back the credit limit. But for use overseas, card holders need foreign deposits to back the credit limit.

Mainland bankers have been keeping a close eye on China Merchants' launch, hoping it will kick-start the fledgling but growing sector.

At present, credit-card business accounts for just 3 per cent of mainland banks' total revenue - significantly below the international average.

According to MasterCard International's vice-president and business manager for Greater China, Simon Hoi Huong, the mainland credit-card market potential is huge.

'Over the last 12 months, only 1.7 per cent of mainlanders' offshore spending of US$12 billion was transacted through credit cards. Cash remained the main means of payment,' Mr Hoi said. That was way behind more mature markets such as Hong Kong, and 'is also where the potential lies', he added.

China's credit-card market is set to expand with the growing awareness of consumer credit and the use of credit cards as a means of payment. Competition from foreign banks will accelerate the trend.

China Merchants planning and funds department official Liu Xiaole said: 'This is particularly true with more and more people - especially the younger generation - wanting to spend on credit, contrary to the more conservative spending policies of the older generations.'

Mr Hoi said: 'The China Merchants project, based on the level of attention it captures, will certainly prompt the credit-card sector to get on a fast growth track.' He said it remained to be seen whether the new card would become a market mover and radically change the existing landscape.

HUGE POTENTIAL

There were 469 million bank cards circulating in China in September, up 22 per cent in a year

More than 500,000 credit cards have been issued to mainlanders

Bank card spending totalled 149.57 billion yuan in the first nine months of 2002, up 58 per cent year on year



China Merchants Bank unveils credit-card plan for masses