On July 16, 2012, a World Trade Organization (WTO) dispute settlement panel determined, in a case brought by the United States, that China maintains a number of measures that treat foreign providers of electronic payment services (EPS) less favorably than the domestic EPS provider, China Union Pay. EPS are services through which transactions involving payment cards (credit, debit, charge) are processed and funds are transferred. The decision is expected to open to foreign EPS providers the Chinese electronic payment market and its more than $1 trillion per year in transactions. 


Beginning in 2001, the People’s Bank of China, which regulates electronic payment services, issued a series of measures setting out specific requirements affecting all aspects of EPS. China's measures impose requirements on institutions in China that issue payment cards, on all point-of-sale terminal and payment card processing equipment in China, and on the institutions in China that have the relationship with the EPS supplier and that handle payment card transactions for Chinese merchants.

In particular the United States challenged those requirements that it alleged:  

  • Establish China UnionPay (CUP), a Chinese company, as the sole supplier of EPS for all domestic Renminbi (RMB) payment card transactions;
  • Require that payment cards issued by banks in China bear the Yin Lian/UnionPay logo (the logo of CUP's network);
  • Require that all ATMs, merchant card processing equipment and point-of-sale terminals in China be capable of accepting payment cards bearing the Yin Lian/UnionPay logo;
  • Require that acquiring institutions post the Yin Lian/UnionPay logo and be capable of accepting all payment cards bearing the Yin Lian/UnionPay logo;
  • Prohibit the use of non-CUP cards for inter-bank and cross-region payment card transactions; and
  • Establish CUP as the sole supplier of EPS for RMB transactions involving payment cards issued in China and used in Hong Kong or Macao and payment cards issued in Hong Kong or Macao that are used in China.

The United States argued that China assumed market access and national treatment commitments under the General Agreement on Trade in Services (GATS) to permit the supply of EPS from either an entity located outside of China (cross-border supply) or through an entity located in China (commercial presence), based on China’s GATS commitments regarding “[a]ll payment and money transmission services, including credit, charge, and debit cards ….” The United States further claimed that the Chinese requirements were inconsistent with China's commitments under Article XVI (market access) and Article XVII (national treatment) of the GATS.

Panel’s Findings

The panel agreed with the United States that the services at issue—EPS for payment card transactions—are classified under China's schedule of commitments under the GATS as a financial service under “all payment and money transmission services.” The panel found that China's schedule includes a market access commitment that allows foreign EPS suppliers to supply their services through commercial presence in China, but not cross-border. In addition, the panel concluded that China's schedule contains a full national treatment commitment for the supply of EPS from either a local presence in China or on a cross-border basis.  

The panel determined that the measures identified by the United States did not demonstrate that CUP was an across-the-board monopoly supplier for the processing of all domestic RMB payment card transactions. However, the panel agreed with the United States that China maintains CUP as a monopoly supplier for certain types of RMB-denominated payment card transactions involving RMB payment cards issued in China and used in Hong Kong or Macao or RMB payment cards issued in Hong Kong or Macao and used in China. 

GATS Article XVI:2(a) requires Members not to limit the number of service suppliers where market access commitments have been undertaken. The panel found that China acted inconsistently with its market access commitment under Article XVI:2(a) of the GATS by granting CUP a monopoly for the clearing of these types of RMB payment card transactions.  

The panel also agreed with the United States that several of China’s requirements requiring use of the Yin Lian/UnionPay logo and interoperability with the CUP network were inconsistent with China's national treatment obligations under Article XVII of the GATS. The panel found that these requirements modify the conditions of competition in favor of CUP and, therefore, that China fails to provide national treatment to EPS suppliers of other Members, contrary to China's commitments.

Although the WTO dispute settlement panel did not accept all of the United States’ arguments, it agreed with the United States on the most important issue: that “every single aspect of China’s regulatory regime” violated China’s WTO commitments in its treatment of foreign service providers. The WTO panel agreed that China’s measures deny a level playing field to foreign service providers and that China has entrenched the market dominance of China Union Pay, affecting competition to the detriment of foreign providers.

The WTO panel recommended that China bring its measures into compliance with its WTO obligations. China and the United States have until September 14, 2012, to determine whether there are issues that should be raised on appeal.