China: New bank card clearing rules herald a post-UnionPay era

Last Updated: 3 May 2015
Article by Xu Ping, Iris Feng and Feng Yuan

On April 9, 2015, the State Council officially promulgated the Decision on the Bank Card Clearing Agencies Access Management(《关于实施银行卡清算机构准入管理的决定》) (the"Decision"), which will come into effect on June 1, 2015.

As a response to a WTO ruling that China must open its bank card clearing market, the long awaited Decision announces the opening of market to both domestic and foreign players. As a result, China UnionPay, the only domestic bank card clearing agency for decades, will usher competitors, including international card companies, banks, as well as domestic third party payment agencies, who will be able to operate RMB-denominated bank card clearing business in the People's Republic of China (the "PRC" or "China").

We summarize highlights of the Decision as follows:

Clearing Business

The Decision defines the bank-card clearing business as "the activities of assisting in clearing the payment by bank-card clearing agencies through formulation of bank card clearing standard and rules, operation of the bank-card clearing systems, authorization of the issuance and acceptance of bank cards using its own brand and providing inter-institution transaction processing services in respect of the bank card under its own brand".

Pursuant to this wide definition, not only the domestic clearing business which is carried out by Union-pay falls into scope of regulation, but the activities of international card companies in dual-logo cards business and cross-border clearing in foreign currency are also captured.


According to the Decision, this sector is subject to dual regulation of the People's Bank of China ("PBOC") and China Banking Regulatory Commission ("CBRC"). The Decision authorizes PBOC and CBRC to jointly formulate implementation rules relating to the conditions to license, licensing procedures, supervision rules, etc. In particular, although PBOC is the authority to issue the clearing license, PBOC has to consult with CBRC when deciding whether or not to grant a bank card clearing license or approve the material changes proposed to make by license holders.

However, it remains unclear how the respective roles of these two regulators are distinguished in regulating the bank card clearing market, in particular who will be responsible for overseeing the business operations of the clearing agencies. Like many questions unanswered by the Decision, this will need to be further defined in the forthcoming implementing rules.


Pursuant to the Decision, an eligible applicant for the clearing license needs to be a legal person incorporated within China under the Company Law, and satisfy the following key requirements:

  • Its registered capital is not less than RMB 1 billion;
  • Its main shareholders (individual shareholder holding more than 20% shareholding, or shareholders holding more than 25% shareholding in aggregate) are required to meet certain criteria, including, among others, (a) the total assets of main shareholder(s) in the previous year shall not be less than RMB 2 billion or their net assets in the previous year shall not be less than RMB 0.5 billion, (b) they shall have continuously conducted banking, payment or clearing business for more than 5 years prior to the application and have been continuously profitable for at least 3 consecutive years; and (c) there is no material violation records in the latest 3 years;
  • it has a standard bank card clearing system which is in line with national standard and industry standard;
  • it has qualified facilities and offsite disaster recovery system located within the PRC for purpose of independent operation of bank card clearing business;
  • it has directors and senior managers who meet the qualification requirements set out by PBOC; and
  • it has the internal control, risks management, information security assurance, anti-money laundry systems that are in compliance with the prudence requirements.
  • The above qualifications are equally applicable to both foreign and domestic players. For foreign investors, the fourth condition is particularly critical as they usually have global infrastructure and facilities (such as data center) located in other countries supporting their existing clearing business. It will certainly be not only costly but also time-consuming for them to invest in and build such facilities within the PRC. For the Chinese regulators, this is a precondition for operating the clearing business as the card clearing is deemed as critical for the major public interest and safety. For example, it is required that all personal information of card holders will only be stored and processed within China.
  • In addition, some of conditions, such as items (iv) and (vi), are quite "soft", leaving the regulators large discretion in determining who will be the first to receive licenses. More detailed rules on each of the qualifications will need to be formulated by the regulators before the Decision becomes operative in practice.

License Application Procedures

The procedure for applying a bank card clearing license is rather complicated and very lengthy, and will normally take one and a half years. Similar to the establishment procedures for financial institutions, the process is divided into two phases, namely the preparation phase and opening phase. PBOC will be the regulator that accepts and reviews the applications and issue the license in consultation with CBRC. It is also worth noting that the successful applicant is required to start the business within 6 months upon its receipt of the license.

Below is a flow chart illustrating the whole procedure how a license is applied and granted:

It should be noted that the preparation period starting from the preliminary approval by PBOC is one year which is not a mandatory waiting period. If an applicant can finish preparation in less than one year, it may submit a license application after completing the preparation.

Business Management Rules

The Decision also spells out certain important guidelines for business activities of the bank card clearing agencies in terms of branding, confidentiality obligation, storage of personal financial information, etc. Specifically, a bank card clearing agency shall, among others,

  • use its own bank-card clearing brand or the bank-card clearing brands held by its investor;
  • not restrict the card issuing agencies and acquiring agencies from cooperating with other bank-card clearing agencies;
  • ensure that the bank-card clearing facilities are safe, efficient and stable and the transaction data are complete and true, process the business with the domestic card issuing agencies and acquiring agencies through the bank-card clearing facilities located with the PRC; and
  • keep the information obtained from the bank-card clearing business in confidence, and store, process and analyze personal financial information within the PRC if such information is collected within the PRC.

Impacts upon Existing Business

The Decision will also have significant impacts on the current operation of international card companies in China. It is common for international card companies to operate cross-border clearing business for foreign currency-denominated cards in cooperation with Chinese banks. Such business may be continued without incorporating a corporate entity in China nor obtaining a clearing license from PBOC; however, international card companies are required to report their business activities to PBOC and CBRC and comply with the business rules set by them.

If the international card companies, however, are already conducting any RMB clearing activities within China, they are required to file an application for the clearing license latest within one year after the effectiveness of the Decision.

Ongoing Supervision

PBOC and CBRC will exercise ongoing supervision over license holders. In case of any material change, such as establishment of branches, change of name, registered capital, brand or director/senior management, the license holder shall apply to PBOC for approval before effectuating the relevant changes.

The Decision itself is certainly encouraging by laying out general rules opening the Chinese bank card clearing market. Under the Decision, foreign players will be able to compete with domestic companies on an equal footing as long as they satisfy the market entry conditions. However, the market players need to be patient to wait for the implementation rules so as to commence the application procedure. How such rules will be translated into reality would also need to be tested in practice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.