New Policy to Spur China's Cross-border Payment Services
Non-bank payment institutions have been playing an increasingly important role in China's cross-border payment services in recent years. In 2013，a pilot program opened the foreign exchange market to qualified third-party payment institutions and the experience of that limited experiment has more recently been applied nationwide. On April 29，2019，the State Administration of Foreign Exchange (SAFE) issued its Circular on Measures Administering Foreign Exchange Business of Payment Institutions，replacing the Circular on the Pilot Project of Cross-border Foreign Exchange Payments by Payment Institutions. That heralded the arrival of a formal supervisory system for cross-border foreign exchange payments. The regulatory measures were drawn up to support growing demand and promote a healthy expansion of the business while preventing risk.
Payment institutions have benefited from China's strong economic growth，official policy support for the sector and the government's "Belt and Road" initiative on trade and infrastructure development. Cross-border consumer purchases have been driven by demand for high-end goods and services，with a strong upturn in demand for travel and study abroad，overseas shopping and cross-border e-commerce. Additionally，the globalization of Chinese enterprises has also made more convenient cross-border payment services essential.
The rise in business between China and countries taking part in the "Belt and Road" initiative provides an opportunity for the development of payment services. Payment institutions have followed the trend and expanded their payment services to related markets via business-to-consumer (B2C) foreign trade and business-to-business (B2B) enterprises.
Policy support is another important factor in the expansion of China's payment business. SAFE's Circular on the Pilot Project of Cross-border Foreign Exchange Payments by Payment Institutions was released in 2013. Seventeen payment institutions were approved to take part in a pilot program to provide cross-border foreign exchange receipts and payment services as well as the associated services of buying and selling foreign exchange. In 2015，the pilot program was rolled out nationwide. In addition，the cap for a single transaction was raised from US$10,000 to US$50,000. In 2018，the Circular of the People's Bank of China (PBOC) on Further Improving Policies on Cross-border Renminbi Business to Facilitate Trade and Investment provided a guide for the development of business by payment institutions. So far，30 payment institutions have been officially designated as qualified to provide cross-border foreign exchange services，and five were granted permission to conduct cross-border renminbi business. These institutions have focused on their own niche segments in the cross-border payment field，and this has helped spur the industry as a whole.
In 2017 Chinese payment institutions made 1.256 billion online cross-border transactions，valued at 318.9 billion yuan，according to the Payment & Clearing Association of China. The number of transactions rose 114.7% over 2016 and the value climbed 71%. The business was heavily concentrated in air tickets，hotels and other accommodation，overseas education and the trade in goods. These segments accounted for a combined 80% of the total though computer software services，communications and international conferences and exhibitions were also part of the picture. Policy support from the government and the upgrading of China's consumer sector have made the cross-border payment business highly attractive.
Opportunities and Challenges
Leading payment institutions and those focusing on enterprise customers are speeding up their expansion plans amid expectations of rapid growth in cross-border payments.
Clearly there is significant potential in this field. E-commerce transactions worldwide will reach US$6.7 trillion in 2020，with cross-border transactions accounting for about US$2.3 trillion，or one-third of the total，according to estimates by consulting firm Accenture. China will comprise half of that total，or about US$1.24 trillion. Booming cross-border trade will generate increased demand for secure，efficient and inexpensive cross-border payment services. Opportunities will be found in areas from traditional B2B transactions to retailers operating on overseas B2C e-commerce platforms as well as from the B2C platforms run by domestic enterprises to small-scale B2B enterprises.
Moreover，the policy environment is conducive to the cross-border payment business. The State Council has repeatedly stated in the annual government work report that the development of cross-border e-commerce，especially for exports，is an important policy objective. The "Belt and Road" initiative creates conditions for cross-border payment services to expand via business cooperation. Regulations put in place by SAFE and the PBOC not only regulate cross-border payment services，but also serve to further their development.
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