The system, to be fully operational by 2005, will allow bank card holders to use their cards at any terminal, no matter at which bank or which city they keep their accounts.

With an all-Chinese shareholder structure and a registered capital of 1.65 billion yuan (US$198.8 million), China UnionPay Co., Ltd. will link all bank's payment systems throughout the country, and tag its brand on all the bank cards and automatic teller machines (ATM) and points of sales (POS).

The first 85 shareholders include the big four state-owned commercial banks, 10 shareholding banks, 45 city commercial banks and 12 rural credit unions.

Since January 10, China UnionPay bank card users in Beijing, Shanghai, Guangzhou, Hangzhou and Shenzhen have been able to use any ATM or POS thanks to China UnionPay.

By the end of the year, China UnionPay will link up ATM and POS machines in 100 cities and build up a cross-region and cross-banking network in 40 major cities, said Dai Xianglong, governor of the People's Bank of China, at China UnionPay's opening ceremony in Shanghai Tuesday.

The national universal payment system is expected to be fully operational by 2005.

China UnionPay was established on the back of the nation's nine-year-old "Golden Card" project, which has set up bank card network service centers in 18 cities and a national bank card information switch center.

Before that, card holders could only use the card in the same city with the same bank where they opened their accounts.

Since 1987, China has issued more than 383 million bank cards. The transaction volume reached 8.43 trillion yuan (US$1.02 trillion) last year, including 92 billion inter-bank transactions.

However, the absence of a nationwide efficient, universal and secure payment network accessible to all bank card users hinders the development of China's bank card industry.

Only 1 percent of all consumption volume was conducted via bank cards.

Analysts say China UnionPay will improve the country's bank card acceptance environment, and, therefore, promote the development of the industry.

Taking into consideration China's entry into the World Trade Organization and the hosting of the 2008 Olympic Games, analysts see a rosy future in China's bank card business.

"We expect trade volume to double on a year-by-year base in the first few years and increase 50 percent each year after that," said China UnionPay's Executive Vice-President Li Ling.

Foreign banks and payment companies are eager to tap China's market, the potential second largest market for credit cards.

Some aggressive players, such as the Hongkong and Shanghai Banking Corporation (HSBC) and Citibank, have already linked up Chinese banks' ATM network in cities such as Shanghai. However, all the foreign players are excluded in the China UnionPay system.

"We are always expecting to utilize a unified payment network in China," said Stanley Wong, chief executive of Standard Chartered Bank China business. "If China UnionPay serves well as this role, we would be very interested to be part of it, either as a shareholder or a member."

He was echoed by HSBC's spokeswoman Dandan Chang, whose bank linked up Shanghai's ATM network last year.

"We are waiting for the detailed provisions concerning foreign banks' credit card service in China and looking forward to enabling our customers to use their cards in any place in the country," she said.

China UnionPay's officials said when and how foreign financial institutions can join the system has not been decided yet. However, they said they are in close cooperation with international credit card organizations, such as Visa and MasterCard.

(China Daily March 27, 2002)