Chinese banks to offer U.S. credit cards

BEIJING — Two major state-run Chinese banks on Wednesday announced plans to roll out American credit cards, including the country's first dual-currency American Express card.

American Express Co. and China's largest state-run commercial bank, Industrial & Commercial Bank of China, launched standard and gold versions of the American Express card aimed at a burgeoning market of affluent Chinese consumers.

Bank of China, another major state-run bank, also said it is launching a co-branded Visa card to mark Beijing's hosting of the Olympic Games in 2008.

The bank also said it had been approved to open its own bank card center, allowing it to better coordinate the revolving credit mechanism that is at the heart of the credit-card system.

American Express chairman and chief executive Kenneth Chenault said the co-branded ICBC-American Express card would provide a vehicle to further extend the 3 percent penetration of credit cards into the China market.

That penetration rate makes a paltry contribution to the $3 trillion in credit card transactions that occur annually out of a total $20 trillion in worldwide consumer purchases.

American Express expects China will eventually have a penetration rate similar to Hong Kong's 20 percent of consumer transactions as the country continues to develop its economy and standard of living.

"Clearly, I think there is strong potential over the next several years for a dramatic expansion," Chenault said.

He said the new cards would initially target the affluent and the aspiring-to-be-affluent consumers in China.

The dual foreign currency and yuan credit cards to be marketed by ICBC allow users to tap the American Express travel services and rewards programs, he told reporters.

While China-based customers traveling overseas can use the many merchants signed up to the American Express network, within China they will be able to use the card at the 400,000 merchants using the China Union Pay network, which ICBC is a member.

Chenault said ICBC would bear all the risk as card issuer while American Express, the New York-based financial services giant, would provide training and technology to improve the bank's credit-risk assessment systems.

That is a big issue in a country where loan defaults are high and banks struggle with double-digit nonperforming loan ratios.