A Mastercard logo is seen on a credit card. File Photo: VCG

US payment company Mastercard's Chinese joint venture (JV) opened for business on Thursday, after the People's Bank of China approved the arrangement for the bank card clearing operations in November 2023.

The opening marks Mastercard as the second overseas bank card clearing institution to enter the Chinese market, after American Express in 2020, which industry analysts said demonstrates the country's determination to open wider to the outside world in the financial sector.

The move is conducive to promoting a more open and internationalized development of China's payment and clearing services, providing diversified and differentiated services for all parties in finance, as well as deepening the supply-side structural reform of the payment industry, analysts noted.

In2023, China's central bank and the National Financial Regulatory Administration approved an application by Mastercard NetsUnion Information Technology (Beijing) Co, a JV between Mastercard and NetsUnion Clearing Corp, to conduct bank card clearing operations in the country. 

According to the official Mastercard website, its Chinese JV has begun processing payments made in China with Mastercard cards issued by the country's banks. In addition, the JV confirmed that Mastercard-branded cards will now be accepted for both domestic and international purchases.

"This is another significant milestone for Mastercard... Our goal is to simplify the payments experience for China's Mastercard cardholders both at home and overseas," Michael Miebach, CEO of Mastercard, was quoted in a statement sent to the Global Times on Thursday. 

"To offer more choices and deliver greater value for Chinese consumers and businesses of all sizes, we will expand the availability of Mastercard-branded products, facilitate the addition of millions of new acceptance locations across the country, and deliver seamless and safe payments experiences every day," said Ling Hai, chairman of the board of Mastercard NetsUnion and president of Asia Pacific, Europe, Middle East & Africa for Mastercard.

The JV reinforced its commitment to continue providing comprehensive support for Mastercard NetsUnion's operations, under the guidance and support of Chinese regulators. 

To facilitate seamless, secure payments for Chinese cardholders at home and overseas, Mastercard NetsUnion will collaborate with local acquirers to expand its acceptance network in China, bolstering its extensive network of more than 130 million acceptance locations worldwide, according to the statement.

Clearing agencies want to operate in China because of the huge demand for cross-border payments with the externally oriented character of its economy. High-quality opening-up is creating the conditions for these clearing agencies to conduct business in the country, economist Pan Helin told the Global Times on Thursday.

"The establishment of JV clearing agencies is a notable sign of the opening-up of the financial market. It has not only allowed the entry of foreign capital, but also facilitated exchanges of technology and knowledge, all of which are direct results of the opening-up policy," said Wang Peng, an associate research fellow at the Beijing Academy of Social Sciences.

In addition to providing consumers and businesses with a wider choice of financial services and products, Wang told the Global Times that the move is also an important step in the internationalization of China's financial market, as cooperation with internationally recognized financial institutions helps the country's banking industry introduce advanced technology and management practices.

"China's banking industry needs to cooperate with foreign clearing organizations to develop overseas business, in order to expand its incremental banking business," Pan noted.

Mastercard's move to boost its presence in the Chinese market has debunked Western claims of foreign capital leaving China, analysts said.

"The active participation of foreign organizations in China demonstrates their long-term optimism in the world's second-largest economy's development. This confidence stems from the huge potential of the Chinese market, including a large consumer base and growing economic strength," Wang said.

Guo Tingting, a vice commerce minister, said that the number of newly established foreign-invested enterprises in the first quarter of this year came at 12,000, an increase of 20.7 percent year-on-year, maintaining the rapid growth trend of last year.

In terms of investment scale, the actual use of foreign capital reached 301.67 billion yuan ($41.67 billion), a record high, the vice minister said.

With its continued financial market opening-up, China, which has the world's largest banking system and the second-largest insurance, stock and bond markets, is creating broad opportunities for global financial institutions, Wang noted.

China has implemented more than 50 financial opening-up measures in recent years, including eliminating foreign ownership limitations in the banking and insurance sectors and lowering access criteria for foreign investors.