A two-day boycott on handling credit cards by an alliance of 46 retailers was launched Wednesday in Shenzhen, the southern boomtown of Guangdong Province, after a series of negotiations on card transaction fees with local bankers failed late last month.

Zheng Mingqiang, general manager with Mingkeda Electronics, told China Daily that the escalation of alliance action, which resulted in a refusal to accept cards tendered for payment earlier in the month, was simply to make their voice heard as the bankers had not responded.

According to Zheng, Mingkeda Electronic, which suffered worst in the "razor margin business" since electronic merchandise was mainly purchased through bank card transactions, fully supports the action with posters saying "no to credit cards" next to the counters.

"Some remedial measures have been adopted in our stores to make sure the refusal of the credit card won't bring trouble to our customers," Zheng added when confronted with criticism by the Chinese Customer Association, which claimed the boycott would eventually hurt customers' interests.

For instance, enough cash is installed in the ATM (automatic teller machine), and a certain amount of discount will be given to customers shopping in Mingkeda.

Meanwhile, China Resources Vanguard Co, the No 1 local retailer, has also joined the move. A spokesman with China Resources Vanguard said that they had paid more than 2 million yuan (US$240,000) in banking card transaction fees to Shenzhen Unionpay every year.

Statistics show that last year 46 retailers paid 46.59 million yuan (US$5.63 million) in handling fees to Shenzhen Unionpay, 4.82 times that of 2002.

The 46 retailers, making up nearly 80 percent of overall revenue of retailing business in this coastal city, complained that the present handling charge on credit cards of 1 percent should be reduced to 0.5 percent, the same charge as neighboring Guangzhou.

But the proposal was immediately turned down by the Shenzhen Banking Association, which stands for 17 banks, during their first meeting, saying "to reduce 0.5 percent is impossible since the POS section business in every bank in Shenzhen has been losing money."

China Unionpay (Shenzhen), the official credit card clearance provider representing the 17 banks to charge the credit card fees, has been asked to disband by local retailers because of its monopoly.

Industry insiders revealed that although US Wal-Mart, which has established its China headquarters in Shenzhen, had taken part in the negotiation at first, it quit the alliance and had "no comment" to offer on the dispute.

Moreover, while local retailers have threatened to take greater action if bankers continue to ignore their appeals, the deadlock in the dispute has aroused attention from the local government, which has already intervened in the negotiations between retailers and banks.

(China Daily June 3, 2004)