A major trade deal between countries is a complex but important endeavor. It involves multiple people and organizations to ensure that the agreement is beneficial for all parties involved, including citizens of both countries. A successful trade deal can be incredibly impactful for both economies, providing access to new markets and opportunities for businesses in each country. Researching existing trade deals, discussing possible changes and outcomes, and executing negotiations are all necessary steps towards designing a successful deal.What happened with the China trade deal?
Years in the making, it appears that the bureaucratic fence may have tumbled under the new China trade deal, according to an article in today’s WSJ.
The China trade deal signed Wednesday clears some of the obstacles that have prevented U.S. banks, credit-card networks, insurance companies, and investors from doing business in China.
U.S. financial institutions have long talked up the prospect of China, where earning even a small share of the massive market could result in sizable gains. But they have struggled to navigate the bureaucratic thicket to obtain the licenses they need to operate there.
Visa Inc. and Mastercard Inc., too, need the government’s stamp of approval to get their cards more widely accepted in China.
Visa and Mastercard, in particular, stand to gain. Their applications to operate in the country have languished. The agreement requires China to make a decision on their applications and to provide a reason if it rejects them.
The credit card issue was adjudicated with the World Trade Organization, but Chinese regulators continue to drag their feet. However, brands appear satisfied this time. Since Union Pay began to blossom, Chinese regulators have passive aggressively delayed U.S. card brands from entering the market. Applications by banks and networks were ignored, delayed, or stalled with very little reason. The WTO was supposed to resolve the issue, but China continued to ignore it.
Mastercard is making “every effort to secure the requisite license to be able to operate in China domestically,” a company spokesman said. “This deal is a step forward in the process.”
“We see significant potential for Visa to support the continued growth and evolution of digital payments in China,” said a spokesman for Visa.
However, don’t count your chickens before they hatch.
U.S. credit-card companies have won cases against China before the World Trade Organization, but China’s efforts to comply with the rulings resulted in a permitting process nearly two decades long.
The New York Times suggests this is a big deal for global expansion, but we will need to see how Chinese regulators procede.
Financial companies. American banks can now take control of their joint ventures in China, while credit-card processors advanced their quest to operate in the country.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
