Chinese regulators keep foreign credit card issuers on tight leash

Creative branding will only take foreign credit card issuers on the mainland so far, experts said, so long as Beijing upholds strict controls on outside players in the domestic card market.

Card issuer American Express recently made what sounds like an industry breakthrough, given the tough regulations that say foreign companies cannot go it alone when issuing cards that deal in both yuan and US dollars.

The company said it had teamed up with China Minsheng Bank to issue a "single network, multi-currency" credit card. That means the card operates exclusively on the US company's network and is not routed via mainland card monopoly China UnionPay. The card sports only an American Express logo and is not co-branded with a UnionPay mark like most foreign credit cards on the mainland.

But issuing a multi-currency card on the mainland is not that simple. Customers at Minsheng Bank will receive two separate cards at the same time - one for yuan-denominated transactions at home, the other for payments made in US dollars abroad. The domestic card bundled with the international one is branded with a UnionPay logo, the Minsheng Bank website shows, keeping the cards well within regulations that say credit cards issued for yuandenominated spending must be processed by UnionPay.

"Sounds like a very creative strategy. But it's not that surprising in this environment," said Li Wei, a finance professor at Cheung Kong Graduate School of Business in Beijing.

Regulators still keep foreign companies on a tight leash when it comes to cross-border transactions. That has given rise to a series of unique products in the card market, many of which rely on customer spending abroad.