China to cut bank card fees

Move aims to spark domestic consumption in wake of inevitable economic slowdown.

The National Development and Reform Commission (NDRC), the top economic planning agency, said the transaction fee cuts will take effect on February 25. NDRC hopes the move will help promote economic growth by boosting domestic demand and alleviating burdens on companies.

Fees will be cut by 23% to 24% on average and will affect industries such as real estate, automobiles and department stores. Catering and entertainment businesses will see the biggest fee reduction at 37.5%.

NDRC noted that transaction charges have long been a burden on companies and have stifled domestic consumption. Cutting fees could help boost domestic consumption and foster the economy as a whole.

Bank card transaction fees in China's 16 listed banks reached US$7.8 billion in the first half of 2012, or 3.8% of the banks' total revenue. Analysts said banks need to find other ways to make up for the decrease in fees. These include strengthening partnerships with online shopping platforms to increase card payment volume.

In October 2012, China had issued a total of 3.4 billion bank cards. Individual bank card consumption during the third quarter of 2012 reached 1,805 renminbi per person, up by 24.3% year-on-year.

Bank card transaction fees are set by a group of government agencies, including the People’s Bank of China, the Ministry of Commerce and the China Banking Regulatory Commission.

China posted its weakest expansion in a decade in 2012, growing 7.8% year-on-year, said the National Bureau of Statistics. China's foreign trade grew 6.2% year-on-year, well below the 10% target set by policymakers and the 22.5% rate in 2011.

Many experts and policymakers believe that expanding domestic consumption is the only measure left that can help grow China's economy.