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More respect should be shown for the growing power and importance of China's industry associations, according to a Peking University academic.
But Associate Professor Cai Shutao, from the university's Guanghua School of Management, also said that associations need to become better organized so they can achieve results.
He made the comments when asked about a recent credit card boycott by a coalition of retailers in Shenzhen, a coastal city that borders Hong Kong in the nation's south.
"To have an open dispute between an industry and another industry is quite rare in China," Cai said.
"It is the awakening of industry associations, which are mainly considered as still being in their infancy." The two-day boycott on bank cards, which occurred in the middle of last week, came after negotiations between the Shenzhen Retailing Association and the Shenzhen Banking Association ended in a deadlock.
Representing 46 merchants whose business accounts for nearly 80 percent of the retail revenue in Shenzhen, the retail association made a plea to local bankers to cut the card fee from 1 percent to 0.5 percent, to bring it in line with other big cities like Guangzhou and Shanghai.
The average gross profit of retailers hovers around 3-5 percent, while some stores selling electronic appliances have to survive with less than 1 percent in gross profits.
The credit card spending rate in electronic appliance stores can be as high as 70 percent.
Hua Tao, general secretary of the retail association, attributes the high handling fee to the monopoly of China Unionpay (Shenzhen).
Serving as a platform between banks and retailers, China Unionpay the only credit card clearance provider in the city granted its network company permission to sign a unified contract with different retailers at a fixed cost.
However, the request from the retail side for the direct links with banks was immediately rejected by the banking association, which represents 17 local institutions.
It argued that the banks' point of sales (POS) business is not making a profit and it is impossible for China Unionpay to withdraw from the business chain.
However, the fact that the two associations are actually talking could be considered progress.
According to Cai, the banks believe that the retail association will be short lived, whereas heated competition within the industry will remain.
In addition, the cost of united action will be too great for the retailers, meaning the banks will win if they can drag the matter out.
"Considering the dominant position of the banks in China, there is no way the retailers can force banks to sit down and talk if they approach the banks individually," Cai said.
"Only through united industry action can they reach certain results."
Under pressure from the public, local banks have lost some of their arrogance. They expressed a willingness to giving certain discounts during later rounds of the negotiation.
Cai said the two sides have not been able to resolve the dispute through consultation because the industry associations are underdeveloped.
Chinese associations, among other industries, should create an improved mechanism to provide more sufficient responses when disputes occur.
"An earlier result would have been made if both associations had more of an influence over their members and if they had thoroughly prepared contingency plans for negotiations," Cai said.
Zheng Mingqiang, general manager of Mingkeda Electronics, which is part of the retail association, agreed, saying the campaign was not well organized, making it hard to get the result it was looking for.
(China Daily June 7, 2004)
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