Plenty of cards in China - but very few being used

Golden Week in China in 2007 saw these numbers. On Oct. 1 and 2, CUP trans-bank transactions on the mainland surged 60 percent year-on-year to exceed 19 billion yuan (2.5 billion U.S. dollars), according to by China Unionpay (CUP), a national electronic payment and interchange network.

The number of transactions in Hong Kong and Macao Special Administrative Regions and overseas markets more than doubled to hit 121,000, with a total value of 390 million yuan, up more than 80 percent.

Bank card transaction now makes up more than 17 percent of China's total retail sales of consumer goods and the figure reached 30 percent in major cities including Beijing, Shanghai, Guangzhou and Shenzhen.

CUP issued 10.21 million credit cards in the first half of 2007in China, up nearly two folds over the same period of last year.

The bank card organization also issued 127 million debit cards in the same period, up 113.7 percent year on year.

ICBC, the country's biggest lender, expects to boost its credit cards in circulation to 50 million at the end of 2009 from 33 million now. The credit card business accounts for about 10 percent of the bank's intermediary business, or fee-based income.

If the biggest bank has those sort of numbers, it's possible although improbable that the figures quoted above are accurate.

Auction site Tobao reached about 100 billion yuan in transactions (1/35 of Walmarts turnover?)

The number of individual bank accounts in China rose 9.6 percent from a year earlier to more than 2.2 billion during the first quarter of 2008. The average number of bank accounts held is 1.69 per person.

The number of individual bank account per capita in Beijing, Tianjin, Shanghai and Shenzhen was far more than the national average, and through March, the number stood at 7.03 (accounts per person)  in Beijing, 6.02 in Shenzhen, 5.71 in Shanghai and 3.45 in Tianjin.

The numbers in economically-developed Guangdong, Zhejiang, Jiangsu, Shandong and Fujian provinces and Beijing accounted for more than 41 percent of the nation's total.

There are suspicions that many accounts are 'proxy' accounts.ie opened by someone on behalf of a silent third party. Hint 'third'...

CCB statistics show its number of high-income clients whose assets were over 3 million yuan (about 440,000 U.S. dollars) had doubled by April from a year earlier.

The number of households with more than 1 million U.S. dollars in liquid assets in the country stood at 310,000 by 2006. (Boston Consulting predicted it would double by 2011.)

More relevant is that China's urban per capita disposable income was 8065 yuan (US$1200) in the first half of 2008; that of rural residents 2528 yuan.

2007's urban per capita disposable income was 13786 yuan in 2007, and of rural residents 4140 yuan.

Retail sales of consumer goods totaled 8.921 trillion yuan (US$1.2 trillion) in 2007, growing 16.8 percent year on year. Urban retail sales were 6.0411 trillion yuan, up 17.2 percent; rural sales were 2.8799 trillion yuan, up 15.8 percent.

All these figures are 'official' Chinese government numbers. Rubbery at best as we have found that the numbers do not always agree.

Interestingly - 35.4 percent of people surveyed generally put their money into banks, and 27.6 percent tended to invest in stocks and mutual funds. This number goes up and down with the Chinese stock market of course.

A total of 2,868 counties or villages had no financial institutions and 2,645 of them were located in the country's west, according to CBRC statistics. Another 8,901 counties or villages had only one financial institution.

There are around 600 million people's details recorded on credit registers, although they don't all have loans or credit cards, it lists if they paid their phone accounts on time etc.

The number of individual people checking their credit file has increased 150 fold since 2005.

Perhaps determining how much money that works out at per account provides a better indicator of possible transaction levels. If in the more prosperous areas ($1200 annual disposable income) there are say 6 accounts to spread the funds over and that suggests the most each 'card' or account could transact is quite low - about $200 per year. If Chinese banks can make a profit at those rates perhaps they should be moving into western banking.

Without giving the game away, we can't forget the fact that there is a very wealthy minority in China which could provide a very attractive customer pool for the right banking services.

To add some more...

Interestingly the domestic Chinese banks are increasingly reluctant to use CUP service in order to retain their portion of CUP service charge. For example, in many cases the merchants would have many POS machines installed, each from different banks. They would first use card issuer's POS machine so that to avoid paying CUP for cross-bank charges.