Banks will delay their card-issuing venture until restrictions are eased HSBC and Bank of Communications (Bocom) are aiming to jump-start their co-branded credit-card business later this year or early next year, according to sources. However, the world's No3 bank by market value and China's fifth-largest commercial bank will have to put their plan for a credit card-issuing equity joint venture on hold pending a relaxation of mainland regulatory restrictions. Instead, the new yuan and US dollar dual-currency cards bearing both banks' logos will be issued through a unit wholly-owned by Shanghai-based Bocom. 'The unit's conversion into a [HSBC-Bocom equity] joint venture will happen only when the mainland regulator allows independent credit-card companies [separate from mainland banks] and permits foreign investors to co-own such companies,' one source said. The credit-card unit will include Bocom's small existing credit-card business, which has about 100,000 cards in issue. For the moment, Bocom would not inject its much larger debit-card arm - which has more than 30 million cards - but client information gathered in the debit-card operations could be shared with the new unit to help it expand its clientele, the source said. The debit-card business was likely to be injected into the credit-card unit in the future, the source added. Foreign banks have long been eyeing China's credit-card market, which is still underdeveloped for a country with a 1.3 billion population, private savings of 12.14 billion yuan as of August and rising consumption. By the end of June, only 714 million bank cards were in issue, more than 95 per cent of which were debit cards with no overdraft facilities. Only about three million cards were real credit cards, according to the People's Bank of China. The proposed credit-card joint venture, which will be up to 50 per cent owned by HSBC, is a key element of an August agreement under which the British giant's Hong Kong banking arm, Hongkong and Shanghai Banking Corp, will pay 14.46 billion yuan for a 19.9 per cent stake in Bocom. The endorsement by the central government for the acquisition - the largest foreign equity investment in China's banking industry to date - had given many observers the impression that a special regulatory approval for the credit-card venture was imminent. But under China's commitments to join the World Trade Organisation in December 2001, such joint ventures will not be permitted until 2007. Instead HSBC will follow in the footstep of larger rival Citigroup, which harboured similar plans for a credit-card joint venture with Shanghai Pudong Development Bank (SPDB) in which it bought a 4.6 per cent stake last year. Like Citigroup, HSBC will for the moment settle for being able to exert influence by appointing key managers to the credit-card unit owned by its Chinese partner. HSBC is expected to name the chief executive as well as the top risk management and marketing officials to the Bocom credit-card unit. Albeit limited, the co-operation with Bocom will give HSBC a large presence in China's nascent credit-card market, unrivalled by earlier foreign bank credit-card alliances with smaller mainland lenders, including those of Citigroup and SPDB or HSBC and Bank of Shanghai. HSBC spokespeople declined to comment. Meanwhile, Bocom planned to submit preliminary listing documents for what is likely to become the first simultaneous flotation of yuan A shares and Hong Kong dollar H shares to the China Securities Regulatory Commission and the Hong Kong stock exchange in the middle of this month, sources said. Bocom is targeting to float on the two markets by the Lunar New Year, which will fall on February 9 next year. The bank is looking to raise US$2 billion by selling 20 per cent of its issued share capital.
