On July 16, 2012, the World Trade Organization (the “WTO”) issued its panel report regarding certain measures affecting China electronic payment services (“EPS”). The report concludes that certain restrictions on the provision of such services violate WTO trade rules, but the report is not a wholesale victory for the United States and its effects may not prove as far-reaching as the U.S. government would appear to believe.

Factual Findings

The WTO panel found that China imposes the following requirements on EPS: (1)   Issuers of bank cards in China must become members of the China Union Pay (the “CUP”) network[1], bank cards must meet certain uniform business specifications and technical standards[2], and the bank cards must bear the Yin Lian or UnionPay logo[3];

(2)   All terminals (ATMs, merchant processing devices and POS terminals) in China that are part of the national bank card inter-bank processing network must be capable of accepting all bank cards bearing the Yin Lian/Union Pay logo[4];

(3)   Acquirers must post the Yin Lian/Union Pay logo, join the CUP network[5] and comply with uniform business standards and technical specifications for inter-bank interoperability; and terminal equipment operated or provided by acquirers must be capable of accepting bank cards bearing the Yin Lian/Union Pay logo[6]; and

(4)   Only CUP may clear certain RMB bank card transactions that involve either a bank card issued in China Mainland but used in Hong Kong or Macao or a bank card issued in Hong Kong or Macao but used in China Mainland in an RMB-denominated transaction[7].

Notably, the WTO panel did not determine that such measures (1) mandate the use of CUP and/or establish CUP as the sole supplier of EPS for all domestic RMB payment card transactions, or (2) prohibit the use of non-CUP cards for cross-region or inter-bank transactions.

Legal Findings

Based upon the above findings, the WTO panel found that the following measures violate GATS trade rules:

(1)   The Hong Kong/Macao clearing requirements limit number of service suppliers and thus establish a form of unlawful monopoly; and

(2)   The issuer, terminal equipment and acquirer requirements are inconsistent with Article XVII of China’s national treatment commitments under the GATS because they do not afford service providers of other Members treatment no less favorable than Chinese service providers.

However, the clearing requirements for Hong Kong/Macao related transactions were otherwise deemed to comply with China’s commitments under Articles XVI and XVII of the GATS.

The WTO panel concluded that the Chinese measures that were inconsistent with the GATS have nullified or impaired benefits accruing to the United States. Accordingly, the panel recommends that the Dispute Settlement Body of the WTO direct China to bring those measures into compliance with China’s obligations under the GATS.

Government Reaction and Outlook

The U.S. government expressed satisfaction with the panel report. The U.S. Trade Representative, Tim Reif, claimed that the implementation of the remedies in the report would likely support the creation of 6,000 jobs in a trillion-dollar market. However, because the WTO panel did not find that China established a monopoly in the EPS domestic market or excludes non-CUP bank cards from cross-region or inter-bank transactions, and that China’s actions are consistent with its commitment on market access, the benefits to the United States remain an open question.

On the Chinese side, the panel report may not be completely unacceptable. The Chinese government expressed relief that no market access noncompliance or domestic and cross-region monopoly were found. The government considers that it can address the national treatment inconsistency in a reasonable period of time, for example, over several years. 

Under the WTO rules, either the United States or China can appeal the panel report within 60 days. So far, neither the United States nor China has made any official indication as to whether it will appeal. If either party appeals, the WTO has six months to respond to the appeal. Even if neither the United States nor China appeals, as mentioned above, it will take years for the panel’s report to be implemented.

China recently accelerated its regulatory efforts in the electronic payment industry, probably by coincidence. For example, China granted 96 non-financial institution payment business licenses in its latest release, and also issued several EPS industry regulation drafts for public comment since late last year. At the current rate, by the time the panel report’s findings are cured, U.S. EPS suppliers may suddenly face a fiercely competitive market in China with the well-entrenched, Chinese-based EPS suppliers holding a dominant share of the market.

Related Resources

Administration Rules on Internet Payment Business of the Payment Processors, Jan 5, 2012
Provisional Rules on Deposit and Management of Client Reserves by Payment Processors, Nov 4, 2011
Administration Rules on Pre-Paid Cards Business of Payment Processors, Oct 28, 2011  


[1] Notice of the People's Bank of China in Relation to the Issuance of Business Practices for the Interoperable Service of Bank Cards and Appendix on Business Practices for the Interoperable Service of Bank Cards (Yin Fa [2001] No. 76) (Exhibits US-56/US-63, CHN-56) Article 4.3
[2] Circular of the People's Bank of China on Promulgation of the "Opinions on Implementation of the Work in Bank Card Interoperability in 2001" (Yin Fa [2001] No. 37) (Exhibits US-40, CHN-54) Article 2.1(iii)
[3] Circular of the People's Bank of China on Further Improving Bank Card Interoperability Related Work (Yin Fa [2003] No.129) (Exhibits US-53, CHN-59) Article 3.2(ii)
[4] Circular of the People's Bank of China on Promulgation of the "Opinions on Implementation of the Work in Bank Card Interoperability in 2001" (Yin Fa [2001] No. 37) (Exhibits US-40, CHN-54) Articles 1.2(i) and 2.1(ii)
[5] Circular of the People's Bank of China on Promulgation of the "Opinions on Implementation of the Work in Bank Card Interoperability in 2001" (Yin Fa [2001] No. 37) (Exhibits US-40, CHN-54) Article 3.1(i)
[6] Guiding Opinions of the People's Bank of China on Regulating and Promoting the Development of Bank Card Acceptance Market (Yin Fa [2005] 153) (Exhibits US-49, CHN-66) Article 2.2
[7] Announcement of the People's Bank of China on Providing Clearing Arrangements for Banks That Handle Personal RMB Deposit, Exchanges, Bank Cards and Remittance in Hong Kong (PBOC Announcement [2003] No. 16) (Exhibits US-44, CHN-60) Article 6