Abstract
Payment methods and habits are evolving over time, as a result of technological innovation and commercial development. China, where paper money was invented more than 1000 years ago, is no exception to this. This chapter looks into the ongoing evolution of payment instruments in mainland China, and the interest and role of the central bank. It finds that, in recent years, the use of non-cash payment instruments has been growing rapidly, driven by commercial, technological and regulatory developments, as well as by changing customer needs. In this dynamic environment, the People’s Bank of China (PBoC) ensures an orderly development and the safety and efficiency of payment arrangements via regulations, the oversight of payment systems, instruments and service providers, as well as by providing payment infrastructure itself, such as the Internet Banking Payment System. With it, the PBoC responds not only to the rapid growth of Internet and mobile payments, but also to the increasing demand for instant payments, which is a global trend. The next technological shift might be a gradual one from electronic to digital money. In this area, the PBoC is also active, by overseeing and regulating Bitcoin and assessing digital currencies in general, including the potential issuance of a digital Yuan.
The views expressed in this chapter are solely those of the author and do not necessarily reflect those of the European Central Bank (ECB).
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Notes
- 1.
Red envelopes (hongbao 红包) are monetary gifts on occasions such as New Year, weddings or births.
- 2.
See, for example, Jessica Dolcourt, “China takes mobile payments to a whole new level”, 22 April 2016 (available at http://www.cnet.com/news/china-takes-mobile-payments-to-a-whole-new-level).
- 3.
For the definition and different roles of money see Michael McLeay, Amar Radia and Ryland Thomas, “Money in the Modern Economy: An Introduction”, Bank of England, Quarterly Bulletin, 2014 Q1.
- 4.
The first credit card outside the US, where it was invented, was launched in 1966 in the UK. It took another 20 years before it arrived in China, where the first credit card was introduced in June 1986.
- 5.
For details, see Robleh Ali, John Barrdear, Roger Clews and James Southgate, “Innovations in Payment Technologies and the Emergence of Digital Currencies ”, Bank of England, Quarterly Bulletin, 2014 Q3.
- 6.
Directive (EU ) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, Official Journal of 23.12.2015, L 337/35. For the original Payment Services Directive (PSD) and the larger regulatory initiative, of which it is part, i.e., the Single Euro Payments Area (SEPA), see Ruth Wandhöfer, EU Payments Integration: The Tale of SEPA, PSD and Other Milestones Along the Road, (Basingstoke: Palgrave Macmillan, 2010); and European Central Bank , “The Integration of the Euro Retail Payments Market – SEPA and Beyond”, Financial Integration in Europe, April 2013.
- 7.
Seigniorage refers to the profit made by issuing currency , especially the difference between the face value of coins and notes and their production and distribution costs.
- 8.
See Tom Kokkola (ed), The Payment System : Payments, Securities and Derivatives, and the Role of the Eurosystem , (Frankfurt aM: European Central Bank , 2010), Chapter 7, for more details on the role of central banks as oversight authority, operator and catalyst in the field of payment, clearing and settlement.
- 9.
Tommaso Padoa-Schioppa, The Euro and its Central Bank: Getting United after the Union, (Cambridge MA: The MIT Press, 2004), p. 22.
- 10.
Zhongguo Renmin Yinhang Zhifu Jiesuan Si 中国人民银行支付结算司 – Payment and Settlement Department of the People’s Bank of China , Zhongguo zhifu tixi fazhan baogao 2014 中国支付体系发 展报告 – China Payment System Development Report 2014, November 2015, p. 149.
- 11.
Zhongguo Renmin Yinhang Zhifu Jiesuan Si 中国人民银行支付结算司, “2015 nian zhifu tixi yunxing zongti qingkuang”, 2015年支付体系运行总体情况, April 2016, p. 5.
- 12.
Zhongguo Renmin Yinhang Zhifu Jiesuan Si 中国人民银行支付结算司, “2016 nian diyi jidu zhifu tixi yunxing zongti qingkuang” 2016年第一季度支付体系运行总体情况, June 2016, p. 4, and “2016 nian di’er jidu zhifu tixi yunxing zongti qingkuang”, 2016年第二季度支付体系运行总体情况, September 2016, p. 4.
- 13.
Ouyang Weimin 欧阳卫民, Xiandai zhifu lun 现代支付论 (Study on Modern Payments), January 2010.
- 14.
The bill category includes bank drafts, commercial drafts, promissory notes, letters of credit and cheques (zhipiao 支票). The latter are the most widely used bills in China, making up more than 90% of all bill transactions in terms of volume and value. Cheque volumes are declining (−29.1% in 2015), while those of commercial drafts (shangye huipiao 商业汇票) are growing (+3.45% in 2015).
- 15.
Remittances refer to money transfers. They are predominantly initiated via Internet , as well as via fixed-line and mobile phones .
- 16.
Zhongguo Renmin Yinhang Zhifu Jiesuan Si (2015b, p. 210, Appendix 2).
- 17.
Capgemini and Royal Bank of Scotland, World Payments Report 2015, p. 9.
- 18.
Zhongguo Renmin Yinhang Zhifu Jiesuan Si (2015b, pp. 137, 154 and 156).
- 19.
See Zhang Hua, “Changjinghua jinrong: Xiayidai qudao” 场景化金融: 下一代渠道 (Scenario-based financial services: The next generation of channels), April 2016.
- 20.
See Usman W. Chohan, “Financial Innovation in China: Alibaba’s Leftover Treasure”, 20 March 2014.
- 21.
See the infographic under http://www.merics.org/merics-analysen/infografikchina-mapping/wie- chinas-internetgiganten-sich-bekriegen.html (only available in German).
- 22.
Examples include crowdfunding and peer-to-peer lending. For the latter, see Ferdinand Schaff, “Bringing Finance to the Masses: How Online Peer-To-Peer Lending is Transforming China’s Financial Landscape”, Merics Web Special, 26 March 2015.
- 23.
Since October 2013, until then Alibaba had used Tencent’s instant messaging tool WeChat.
- 24.
Melanie Lee, “Alipay Report Shows Mobile Commerce Booming in China”, 8 December 2014.
- 25.
See Alibaba statistics, October 2016 (available at: http://expandedramblings.com/index.php/alipay-statistics).
- 26.
See Kokkola, note 8 above, pp. 160–164, for the central bank as oversight authority and for the distinction between prudential supervision and payment systems oversight.
- 27.
See Bank for International Settlements (BIS), Committee on Payment and Settlement Systems (CPSS), Payment, Clearing and Settlement Systems in the CPSS Countries, Vol. 2, November 2012, pp. 31-34, for the institutional framework in China, and Patrick Hess, “Securities Clearing and Settlement in China – Markets, Infrastructures and Policy-Making”, ECB Occasional Paper Series, No. 116, July 2010, pp. 21-22 for the role of the PBoC as operator, overseer and catalyst.
- 28.
Zhongguo Renmin Yinhang Zhifu Jiesuan Si (2015a) 中国人民银行支付结算司 (Payment and Settlement Department of the People’s Bank of China ), Hulianwang shidai de zhifu biange 互联网时代的支付变革 (The evolution of payments in the internet era), 23 April 2015 (own translation).
- 29.
Zhongguo Renmin Yinhang Zhifu Jiesuan Si (2015b, p. 5). See BIS, CPSS, Payment, Clearing and Settlement Systems in the CPSS Countries, Volume 2, November 2012, pp. 42-50 for a detailed description of the systems mentioned in the quotation.
- 30.
Zhongguo Renmin Yinhang Zhifu Jiesuan Si (2016b, p. 6).
- 31.
Heike Mai, “Instant Revolution of Payments? The Quest for Real-time Payments”, Current Issues – Global Financial Markets, Deutsche Bank Research, 9 December 2015, p. 2.
- 32.
Caixin Zhoukan, 财新周刊 (Caixin weekly magazine), “Zhuanfang Zhou Xiaochuan”, 专访周小川 (Zhou Xiaochuan interview), 15 February 2016.
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Hess, P. (2017). The Ongoing Evolution of Payment Instruments in China: A Case Study in Financial Innovation, and on the Role of the Central Bank. In: Rövekamp, F., Bälz, M., Hilpert, H. (eds) Cash in East Asia. Financial and Monetary Policy Studies, vol 44. Springer, Cham. https://doi.org/10.1007/978-3-319-59846-8_8
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