The anticipated foreign rivalry at the end of 2006, when foreign banks will be allowed into renminbi bank card business as part of China's World Trade Organization commitments, also makes a faster development of the industry an urgent task.

"China's bank card industry stands at a critical juncture," Xu Luode, director-general of the central bank's Payment and Settlement Department, told reporters yesterday.

The central bank is stepping up work on drafting a new bank card regulation, which will require approval from the State Council to provide legal backup for the industry's healthy growth.

"The regulation has been put on the State Council's work list for this year, and will hopefully be endorsed by the end of the year," Xu said.

The central bank is working with other government agencies to draw up a blueprint and formulate favorable policies for the bank card industry, and is studying ways to better co-ordinate the interests of card issuers, cardholders, merchants and third-party intermediaries, he said.

The bank has also made substantial progress in formulating technical standards for the use of IC cards, which are expected to eventually replace the currently prevalent magnetic cards that banks are issuing.

Since the Bank of China issued the country's first bank card in 1985, the industry has witnessed a rapid growth, making China one of the most promising markets for the global bank card business.

A total of 762 million cards had been issued last year, more than 100 million up from a year earlier, while it took 13 years for Chinese banks to bring issuance up to 100 million, central bank statistics indicated.

After linking up all cities in 2003, the national bank card network extended further last year to take in some economically developed counties.

Subsequently, bankcards have been playing a greater role in the economy, with sales through bank cards accounting for some 5 percent of total retail sales last year, up from 2.1 percent in 2001.

The percentage has topped 20 percent in some more developed cities such as Beijing, Shanghai and Guangzhou and Shenzhen in southern China's Guangdong Province, according to the central bank.

The growing popularity of plastic will provide more growth momentum for the Chinese economy, which is has been driven more by investments than consumption in recent years, Xu said.

Every 10 percentage point increase in the proportion of card consumption in total spending will bring an additional half a percentage point of economic growth, he said, citing research findings in developed nations.

Credit card issuance witnessed explosive growth last year, surging 263 percent from 2003 to 980 million.

The major reason for the unexpectedly fast growth last year is the improvement in the banks' technical preparations last year that helped release the depressed demand for credit cards.

There were less than 400 million credit cards at the end of 2003.

"Credit card issuance will continue to grow in the coming years, but the growth will not be as fast as last year," Xu said.

(China Daily February 4, 2005)