Federal Reserve Bank of San Francisco
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The Development of Payment and Settlement Systems in China

April 30, 2008

Author(s): Cindy Marks

As Chinese consumption patterns change and financial services become more complex, individuals and businesses are increasingly conducting payments and settlements through their banks. Loan payments can now be debited automatically and common bills for water, power, gas, and telephone services can often be paid via banks. The debit card market in China has grown markedly in the last three years, albeit from a low base. Banking by telephone, internet, and mobile technology is gaining popularity as well. While these trends represent natural steps toward financial modernization, these new products and services have placed pressure on China’s financial infrastructure that require investments in technology and the development of new systems to support the flow of money across the country. The existing gap between the demand for individual payment and settlement services and the present supply of such services by banks has contributed to long wait times at bank outlets. This Asia Focus report summarizes recent changes in China’s payment and settlement systems and considers how China is addressing technology and risk management concerns as it works to create a more sophisticated, international financial sector.

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