China is an extremely fast-growing economy where the standard of living inthe major urban centers has improved even faster than the overall growth rate.The financial sector of the economy is also evolving rapidly. However, China is at a very different position than many other economies in terms of its paymentsystems in the economy. In China personal checks are not used. The use of cashis extremely high in China. Although debit cards are widespread and credit cards are beginning to be introduced, cash continues to be the payment methodof choice when consumers pay their monthly bills and pay for their purchases.
When paying monthly bills for utilities and rent consumerstypically have two choices: (1) pay in cash or with a debit card, which oftenmeans standing in line or (2) establish an automatic payment arrangement witha bank where the utility bills are debited against the account each month oruse electronic banking.2 According to an executive at one of thefour largest Chinese banks, about 2/3 of its customers have chosen to useoption (1).
Chinahas a single debit and credit card network; Moneylink.3 Moneylinksrates are regulated by People Bank of Chinathe Central Bank of China, although complaints regarding the level of fees are widespread. Many medium andsmaller merchants do not offer debit card payment because of the interchangefee and the cost of acquiring the point of sale (POS) terminals for debit card(and credit card) payment. Thus, cash is the primary payment method whenconsumers pay for their purchases.
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