23 August 2014

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Ben Thorpe - Glory

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A Cashless China? Don’t Believe the Hype

14 March 2014  |  2966 views  |  0

Browsing through the pages of the FT website the other week I was amazed to discover an article which predicted the rise of a cashless China. Highlighting the recent explosion in credit/debit cards, of which there are currently 4.2bn of in circulation, the article states that approximately 70 percent of consumers in China’s largest cities prefer cards to cash.

I find this surprising. Having been a regular visitor to China over the past 20 years and a resident for three of those, I can honestly say that without cash in your back pocket you would seriously struggle to get by. Even in Shanghai, one of the most modern cities in China renowned for being a great adopter of new technology.

In my experience, the universal acceptance of cash and the lack of accessible alternatives make it the natural choice. Thinking back to when I applied for my first Chinese credit card, it was a drawn out process to say the least. Even more of a hassle  was paying the bill each and every month.  Transactions overseas had to be paid for in local currency so I ended up paying my credit card bill in cash. I would routinely withdraw piles of RMB banknotes from one bank and hand it over to another part of the bank, which left me wondering why I hadn’t paid my bills with cash in the first place. After about a year I decided to cancel my credit card and stick with the ATM for overseas and domestic transactions.

To this day the Chinese attitude to cash has stayed with me. Back living in the UK, I still find myself withdrawing cash from the ATM pretty much every time I come across one. A daily ritual for most in China, the fact that over 70,000 ATMs are installed yearly is arguably a case in point.

Of course, that’s not to say that things aren’t changing however, far from it in fact. The digitization and gamification of Ang Pows now sees virtual red envelopes exchanged by smartphone at Chinese New Year. This demonstrates that even the oldest of Chinese traditions aren’t immune from change. Yet, I refuse to believe that China will go cashless anytime soon. With regard to ang pows, my friends in China assure me that these digital red envelopes were exchanged primarily between friends and acquaintances and it was the novelty factor rather than convenience which contributed to their successes. Not something to do with close family – certainly not yet. 

And thinking about China as a whole, around 50% of the total population live in rural areas, which are credit/debit card deserts, relatively speaking. Moreover, the Chinese central bank’s recent announcement that they are to impose stricter regulations on mobile phone payments and virtual credit cards will undoubtedly dent the inroads e-payments have made in the country.

In a few months I’m due to fly out to China for a series of meetings. For a brief moment I considered going cashless as an experiment but then I realized how difficult how it would be. My flight is prepaid of course, but I am not sure I’d get off the taxi rank at the airport and any travel around the city would certainly be a challenge. Paying for the hotel would be easy enough as long as I stick to the major cities but for much of my general dining, entertaining and shopping, I’m not going to rely solely on my cards and this is exactly the reason why my pre-flight visit to the Bureau de Change wont come to an end anytime soon!

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Ben Thorpe

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