Mao Zedong once said, 'A single spark can start a prairie fire'. Nobody understood better than Mao the power of China's mass movements. Now the capitalist mainland is undergoing a merchandising mass movement sparked in Shenzhen, and spreading through Chongqing, Wenzhou, Ningbo, Shanghai and Beijing.
On June 1, 46 major department stores in Shenzhen joined together to protest over the 1 per cent credit card commission levied by local commercial banks, demanding it be halved. Department store merchandisers claimed their profits were only 1 to 6 per cent of retail turnover, and that bank credit card commissions and taxes took it all.
But Shenzhen's commercial banks refused to negotiate commission levels, arguing they provided convenient customer services and covered the costs of installing electronic swipe machines in stores.
Shenzhen's major department stores reacted with protests. Signs went up at sales counters saying the swipe machines were broken and only cash was acceptable. Then the China Franchise Operators Association openly supported Shenzhen's merchandisers, sparking a national movement.
Throughout the past decade of market reforms, former premier Zhu Rongji wanted to stimulate consumption. Banking reform and the introduction of credit cards promoted the expansion of a credit system in the mainland's traditionally cash-based society. However, somebody forgot to discount the 'Chinese characteristics' wild card.
The People's Bank of China (PBOC) sets credit card commission guidelines. Individual banks are free to negotiate fees within these limits. The PBOC guidelines set commissions at 1 per cent for department stores, 3 to 5 per cent for restaurants and hotels, and 3.5 to 4 per cent for foreign exchange credit cards. In practice, banks in Shenzhen and Shanghai charge only 1 to 2 per cent, and a mere 0.5 per cent in Beijing, where competition is fierce.
When Shenzhen merchants demanded local banks cut their commissions down to Beijing levels, merchandisers everywhere joined the movement.