2. New Achievements of the Payment System in 2008
In 2008, China Payment System withstood severe tests and maintained efficient and steady operation, and the construction of China Payment System saw new important progresses.
2.1 Legal systems and working mechanism were improved constantly
Rules and regulations related to the Domestic Foreign Currency Payment System were promulgated. With respect to the outstanding problems in the domestic foreign currency payment arrangement, the People’s Bank of China (“PBC”) re-designed and re-arranged the original domestic foreign currency clearing and settlement mechanisms, established and ran the Domestic Foreign Currency Payment System, and complementarily promulgated a series of rules and regulations, such as the Administrative Measures for the Domestic Foreign Currency Payment System (for Trial Implementation), the Provisions on the Operation Management of the Domestic Foreign Currency Payment System (for Trial Implementation), the Provisions on the Business Processing of the Domestic Foreign Currency Payment System (for Trial Implementation) and the Provisions on the Administration of the Proxy Settlement Banks for the Domestic Foreign Currency Payment System (for Trial Implementation), comprehensively regulating the rights and obligations of parties concerned in the system in relation to access rules, risk management, settlement arrangements, charging strategy, operation and maintenance, etc.
Rules and regulations related to payment instruments were further improved. In May 2008, the PBC promulgated and implemented the Measures for the Settlement of Bank Bills of One Municipality and Three Provinces in East China, the Accounting Procedures for Bank Bills of One Municipality and Three Provinces in East China and other relevant rules and regulations. In accordance with these rules and regulations, the scope of financial institutions that can directly or be authorized to issue the bank bills of One Municipality and Three Provinces in East China (Jiangsu, Zhejiang, Anhui and Shanghai) was expanded from original five (Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications) to all banking financial institutions within One Municipality and Three Provinces in East China which may voluntarily choose whether to participate in accordance with the principles of marketization or not. Related institutional arrangements laid an institutional foundation for advancing the coordinated financial development and financial infrastructure construction of the Yangtze River Delta Area and promoting the regional economy and trade development as well as the expansion of bill circulation fields.
The real-name bank account system was further improved. The PBC promulgated the Notice on Further Implementing the Real-name Personal RMB Bank Savings Account System (YF  No. 191), further improving the relevant regulations on the administration of the opening and use of real-name personal bank accounts and clarifying the duties of and requirements for the branch offices of the PBC to supervise and manage the real-name personal bank accounts.
The payment service and policy consultation meeting system of the PBC and commercial banks was established. In 2008, the PBC’s Head Office and related branches convened commercial banks to hold the payment service and policy consultation meetings on a quarterly basis and in the form of regular meeting, so as to communicate and exchange ideas on certain key issues regarding the development of payment system, which set up an exchange platform for payment services and supervision information and strengthened the information communication between the Central Bank and commercial banks. Meanwhile, the PBC timely informed the banking financial institutions of new circumstances and changes of payment sector and conveyed them the relevant regulatory requirements and work measures through the organization of professional trainings. These measures not only helped to improve the scientificalness and effectiveness of the policies and regulations formulated by the PBC to better carry out payment and settlement functions, but also were helpful for commercial banks to timely and accurately understand the intention of the PBC’s policies to better reflect issues, make recommendations, broaden work ideas and improve working methods.
Propaganda, education and guidance to the public were strengthened. For risk cases (such as cloning bills, Internet Banking frauds and bankcard crimes) as often seen in the payment and settlement fields in China in recent years, the PBC organized to collect, collate and analyze the risk cases in the payment and settlement fields, studied the laws with regard to the emergence of and prevention from payment risks, summarized and proposed the guidelines for prevention from payment risks, and further strengthened the payment risk education to the public.
2.2 The construction of the payment system and other infrastructural facilities saw new important progresses
In 2008, China Payment System ran smoothly and had a steady growth in business volume. Throughout the year, various payment systems processed a total of 9.382 billion payment transactions, total RMB 1,131.04 trillion Yuan, 37.62 times of the 2008 GDP . At the same time, the construction of the payment system and other infrastructural facilities in China saw new important progresses.
The Domestic Foreign Currency Payment System was launched. On April 28, 2008, the Domestic Foreign Currency Payment System which the PBC organized to construct was successfully launched, and payment services in eight currencies such as Hong Kong Dollar, Japanese Yen, Euro and US Dollar were launched successively, which provided a safe, efficient and cost-effective foreign currency clearing platform for domestic financial institutions and further solidified the financial infrastructure in China. By the end of 2008, the system had run smoothly for 172 working days, processing a total of 71,300 currency payment services, equivalent to about 8.05 billion US dollars , in which, after the US dollar payment service was launched on July 24, 2008, the system processed nearly 700 payment services per day, equivalent to more than 7,500 US dollars per day.
Domestic Foreign Currency Payment System
The PBC took the lead in establishing the Domestic Foreign Currency Payment System (DFCPS) and successively launched payment services in eight currencies, i.e., Hong Kong Dollar, GBP, Japanese Yen, Euro, Canadian Dollar, Australian Dollar, Swiss Franc and US Dollar as from April 28, 2008.
System architecture. The foreign currency payment system adopts the Y-shaped information flow structure. The foreign currency clearing center is responsible for receiving, clearing and transmitting payment instructions, and proxy settlement banks carry out the settlement as per the instructions.
Conditions of proxy settlement banks. Upon assessment, Bank of China is the proxy settlement bank for US Dollar, China Construction Bank for Hong Kong Dollar, Industrial and Commercial Bank of China for Euro and Japanese Yen, and Shanghai Pudong Development Bank for Pound Sterling, Canadian Dollar, Australian Dollar and Swiss Franc, each with a term of three years starting from the date when the payment services begin.
Conditions of participants in the System. Participants in the DFCPS are the banks qualified for the participation under the regulations of the PBC. A total of 10 banks had participated in the DFCPS in the capacity of legal persons by the end of 2008.
Main services processed by the System. Currently, the DFCPS mainly provides the following two services: first, domestic inter-bank credit service (i.e., payment service initiated by domestic paying banks to domestic beneficiary banks through DFCPS), which is the main service of the DFCPS, limited to the foreign currency exchange transfer items, with domestic payer and payee, which can be valuated and settled in foreign currency in accordance with the regulations of the State Administration of Foreign currency exchange; second, offset balance/net amount business (i.e., multilateral payment service initiated by foreign currency clearing institutions to the DFCPS for the settlement of foreign currency offset balance net amount).
System’s characteristics. The DFCPS has the following characteristics: First, it can process the payment and settlement in several currencies, such as US Dollar and Hong Kong Dollar. Second, it adopts a real time gross settlement mechanism, processing payment instructions of participants and privileged participants in real time one by one, and making real-time settlement of funds. Third, it adopts an architecture featuring "one access and one account settlement". Banks connect to the DFCPS in the capacity of legal persons through one single interface and manage funds in a centralized manner for their branches, to fully mobilize banks to participate in the System and reduce systemic risk points. Fourth, the participation in the DFCPS is market-oriented and non-mandatory in the mode of market movement. The settlement service of a proxy settlement bank is priced based on the market conditions.
Risk management of the System. The design of the DFCPS borrows the advanced experience of the international payment system and adopts a series of measures and mechanisms such as Real-Time Gross Settlement, day financing, overnight financing, queue management, clearing window and queue matching, to prevent the DFCPS-related credit risk, liquidity risk, operational risk, legal risk and systemic risk.
Supervision of the Central Bank. To ensure the safe and smooth operation of the DFCPS, the PBC has issued a series of rules and regulations to comprehensively prescribe the rights and obligations of parties concerned in relation to access rules, risk management, settlement arrangements, charging strategy, operation and maintenance, etc.; it manages the DFCPS in a centralized manner according to law and supervises and inspects the participants, privileged participants, proxy settlement banks and the foreign currency clearing center. Meanwhile, the PBC actively cooperates with Central Banks of relevant note-issuing countries (regions) in cross-border supervision in compliance with relevant international standards.
The launching of the DFCPS is an important measure taken by the PBC to improve China Payment System, and may help to meet the demands of commodity and service trade in China for safe and efficient foreign currency payment services, which is of great importance for adapting to and promoting China’s economic and financial reform and development.
The construction of the PBC’s second-generation payment system was promoted steadily. In order to better meet the requirements of the nation’s economic and financial reform and development for the Central Bank payment system, considering the life cycle of the payment system, the PBC decided to organize to establish a new generation of payment system, by borrowing and absorbing experience of other countries on payment system construction, and gave overall consideration to establish the Central Bank Accounting Data Centralization System (ACS). Currently, the PBC has completed the Report on the Construction Perspective of the Second-Generation Payment System and the ACS, specifying the basic objectives and principles, overall framework, key functional characteristics, project implementation plans, etc. for the construction of two systems.
The emergency disaster recovery system for the payment system was improved constantly. In order to ensure uninterrupted operation, continuous business and complete data of the payment and clearing system, the PBC organized to establish a centralized emergency disaster recovery system for the payment system CCPC and an emergency backup system for the check image exchange system. Currently, the two emergency backup systems have been qualified for emergency drilling. Furthermore, in order to ensure the payment and clearing system would be switched over from the production environment to the emergency backup environment for operation and successful switchback, the PBC developed and verified the planned switchover and emergency switchover guidelines of payment system.
The construction of the electronic commercial draft system was launched and pushed forward as planned. In order to support the innovation of commercial bank draft businesses, promote the development of the commercial draft market and resolve the risks of traditional paper commercial drafts, the PBC officially launched the construction of a national electronic commercial draft system, and completed the demand preparation, demand confirmation, demand analysis, verification and so on in 2008.
The functions of the securities settlement system was improved day by day. First, the Delivery Versus Payment (DVP) settlement in real time was fully realized among settlement members in China’s inter-bank bond market, and the settlement control was further strengthened; the supporting Fund Account Management System was officially operated, and the functions such as national bond distribution DVP settlement, issuance, payment and creditor’s right confirmation DVP settlement and net pre-issued national bond DVP settlement were launched successively, to lay an important foundation for the innovation of financial products and services based on rapid conversion of bonds and cashes. Second, the DVP settlement mechanism was actively advanced to be fully implemented on the Exchange’s securities, and the DVP settlement program was further elaborated. At the same time, the relevant settlement system service risk control and internal operating procedures were standardized and improved continuously.
Bond Trading of Non-Banking institutions in the Inter-bank Bond Market Realized Real-Time DVP Settlement
On August 1, 2008, the real-time DVP settlement service of non-banking institutions in China’s inter-bank bond market was officially launched, marking a new breakthrough for the construction of the DVP settlement mechanism in China’s bond market, and fully realizing the DVP settlement of bond trading of all members participating in the market.
The real-time DVP settlement of non-banking institutions was realized under the premise of the construction of real-time connection between the Fund Account Management System (hereinafter referred to as the Fund System) of China Government Securities Depository Trust and Clearing Co., Ltd. (hereinafter referred to as the CDC) and its Bond Bookkeeping System and the Central Bank’s payment system. The Bond Bookkeeping System directly sends the fund settlement request to the Fund System according to the bond settlement instruction of the parties of the transaction, and transfers the bond ownership upon receipt of information of successful fund settlement from the Fund System. At the end of the day, the Fund System automatically transfers the DVP settlement fund of the parties back to the bank account designated by the parties through the Central Bank’s payment system. The CDC’s Fund System, as the core system of fund clearing and settlement in relation to bond trading, is one of the base systems supporting the DVD settlement mechanism. The operation of such system laid an important foundation for the innovation of financial products and services on the basis of the rapid conversion between bonds and cashes, and further enhanced the liquidity of financial assets in the inter-bank bond market, to make the bond trading-related bond delivering/receiving and fund settlement more convenient with lower risks.
In line with the smooth operation of non-banking institutions’ DVP services, the CDC, in accordance with PBC Announcement  No. 12, formulated and implemented a series of business systems and regulations, clarifying and defining the behaviors and relevant rights and obligations of the participants in such respects as business process, operational norms and legal relationship, which formed the legal basis for market participants to conduct DVP settlement transactions and offered the operational basis to regulate DVP settlement transactions in the inter-bank bond market. Meanwhile, in accordance with the PBC’s regulations on administration of "earmarking" and "end-of-day zero balance" of special bond settlement fund accounts in non-banking institutions, the CDC mapped and separately set special bond settlement accounts and custody accounts in non-banking institutions through the system, to prevent the mix and misappropriation of settlement funds; forced the end-of-day balance of special bond settlement fund account as zero by setting up auto-transfer-back function of end-of-day settlement funds; and required non-banking institutions not to initiate DVP settlement transactions to special bond settlement accounts after 16:30 on the business day through institutional constraints to strengthen the business management and effectively guard against financial risks.
At present, the DVP business of non-banking institutions develops in good shape. By the end of 2008, 153 non-banking institutions had applied for the agreement, in which 55 non-banking institutions had signed related business agreements with the CDC and 21 had developed the businesses. Five months since the opening of DVP settlement business in non-banking institutions, they have settled a total of 3,069 DVP transactions, with capital settlement amounting to RMB 739.962 billion Yuan. DVP settlement has become the preferred method of settlement for various transaction parties gradually with its low-risk, high-efficiency characteristics.
2.3 Non-cash payment instruments were applied widespread increasingly
In 2008, with the successful establishment and operation of various payment systems and the continuous strengthening of promotion of non-cash payment instruments, the non-cash payment businesses developed very rapidly. In 2008, there were approximately 18.327 billion payment transactions by use of bill, bankcard, exchange, entrusted collection and collection and acceptance in China, totaling RMB 633 trillion Yuan, respectively, up by 18.61% and 6.75% on year-on-year basis. Annual per capita non-cash payment transactions initiated were 13.8, up by 18.05% on year-on-year basis.
Bill business scope was further expanded. While keeping a dominant position in the business payment field, bills gradually expanded to the field of individual payment. On May 8 and December 1, 2008, bank note services and the bank draft services of One Municipality and Three Provinces in East China were launched in the PBC’s Small-sum Payment System respectively, optimizing business processes, thus improving the standards for prevention of billing risks, enhancing the billing efficiency and further broadening the field of bill circulation.
Bankcards were applied more widely. By the end of 2008, the per-capita held cards had reached 1.36 in China, in which the per capita held cards for urban population were 2.97, respectively, up by 19.3% and 17.4% on year-on-year basis; the annual bankcard spending accounted for 24.2 % of the social retail goods, up by 2.3% over 2007, thus bankcard has become the most frequently used non-cash payment instrument for China‘s personal consumption. The bankcard acceptance environment was further improved. Corporate cards were promoted in financial budget units at all levels in full swing. By the end of 2008, more than 100 budget units directly financed by the central government and 26 budget units financed by the local governments of provinces (autonomous regions and municipalities) had promoted the use of corporate cards, and corporate card transactions had increased rapidly.
In addition, the PBC continued to encourage and regulate the development of e-payment businesses. The emerging electronic payment modes continued to emerge, playing an active role in reducing the use of cash.
Corporate Card Reform on a Pilot Basis Has Made Smooth Progress
The corporate card system is a modern treasury expenditure management system based on the state treasury single accounting system and with bankcards as its carriers, and is a new product and institutional innovation to realize the openness in treasury financial management and transparency in fiscal expenditure through bankcards. Promoting the use of corporate cards is of great significance for strengthening the budget management of fiscal expenditure, deepening the centralized treasury payment reform and promoting the application and development of bankcards, and plays an active role in preventing and controlling corruption from the source. The People‘s Bank of China (PBC) and the Ministry of Finance (MOF) have always attached great importance to promoting the use of corporate cards. Nine ministries and commissions including the PBC and the MOF jointly issued The Opinions on Promoting the Development of the Bankcard Industry in April 2005, and convened a national bankcard work conference in April 2006, which made overall arrangements for the work related to the promotion of corporate cards, put forward the specific requirements and promoted the pilot program of corporate cards in some provinces and cities. In May 2007, in order to expand the coverage of the program and speed up the use of corporate cards, the PBC and the MOF jointly convened a national work conference on corporate card promotion, and issued the Tentative Measures for Administration of Corporate Cards in Budget Units Directly Financed by the Central Government in July 2007, which spelt out general ideas, basic principles, institutional arrangements, policy requirements and implementation steps of the corporate card pilot program, playing a guiding role to budget units financed by the central and local governments in further deepening the pilot program according to the requirements of standardization. In January 2008, the MOF and the PBC jointly convened the National Teleconference on Corporate Card Reform on a Pilot Basis, comprehensively mobilizing and deploying the 2008 national corporate card reform program, and putting forward the targets of comprehensively promoting corporate cards in all budget units financed by the central governments and provincial governments.
According to the spirit of the Conference and the requirements of corporate card reform, the PBC’s branches made close communication and cooperation with the MOF to create the synergy, and made positive efforts in promoting the use of corporate cards. At present, the corporate card reform pilot program of budget units financed by the central and local governments has progressed smoothly. By the end of 2008, banks issuing corporate cards on a pilot basis had expanded to 27 banks such as Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, Everbright Bank and CITIC Bank, issuing a total of 1.55 million corporate cards, and corporate card trading had grown rapidly. More than 100 budget units directly financed by the central government including the MOF, CPC Disciplinary Committee and Chinese Academy of Sciences implemented the corporate card settlement; for budget units financed by local governments, the local branches of the PBC and the fiscal authorities carefully implemented the relevant requirements, formulated local plans of enforcement, actively guided, deployed and pushed forward the promotion of corporate cards under their respective jurisdictions. Under the high attention and strong support of local governments and through the concerted efforts of the fiscal authorities, the PBC, budget units, card-issuing banks and China Unionpay (CUP), the promotion of corporate cards at various local levels made important progresses. By the end of 2008, the number of provinces and cities promoting the corporate card pilot program had been up to 26 in China. Such four municipalities as Beijing, Shanghai, Tianjin and Chongqing, and such provinces (autonomous regions) as Guangdong, Zhejiang, Hubei, Hunan, Anhui, Inner Mongolia, Shanxi, Zhejiang, Fujian, Hainan and Gansu had launched the corporate card settlement method, which played an important role in reinforcing the business-related expenditure management, advancing the sunny finance policy, promoting the development of bankcards and reducing the use of cash and laid a solid foundation for the further promotion of corporate cards nationwide.
2.4 Construction of the Olympics payment environment achieved remarkable success
Before the opening of the Beijing Olympic Games, based on the construction of payment environment for Olympics host cities and important Olympics tourism areas, the PBC set up the Olympics Payment Environment Construction Leading Group jointly with relevant departments, to strengthen the organization and leadership and deploy the construction of payment environment for the six Olympics host cities, i.e., Beijing, Tianjin, Shanghai, Shenyang, Qingdao and Qinhuangdao, which achieved remarkable results.
Account service level was improved comprehensively. For the special needs during the Olympic Games, in the spirit of simplifying the account opening, using the program and establishing a good international image, the PBC and Beijing Olympic Organizing Committee made special arrangements for foreign institutions and individuals to open bank settlement accounts. Each Games host city generally established a green channel of examination and approval services for the Olympic Games accounts, so that special person in charge and speedy submission and approval were achieved.
Bankcard acceptance environment was improved thoroughly. The PBC promoted the construction of bankcard acceptance environment in major Olympics areas and created barrier-free demonstration zone for swiping card to drive the whole construction of the payment environment in major Olympics areas; strengthened the bankcard risk management, carried out a dedicated campaign to jointly combat bankcard-related crimes together with the Ministry of Public Security, developed emergency response plans for emergent risk events during the Olympic Games and ensured the safe use of bankcards during the Olympic Games; implemented the transformation of a unified image of the ATM, and encouraged commercial banks to develop mobile phones, telephone, digital TV set-top boxes and other innovative payment channels to broaden bankcard payment functions; took such measures as promoting commercial bank’s accountability, opening the CUP RMB card system to foreign credit cards and the BC issuing prepaid tourism cards to ensure the creation of a convenient and rapid foreign credit card acceptance environment for foreign cardholders; vigorously advocated bankcards, actively played a guiding role of the mass media and created a harmonious and healthy payment atmosphere of the Olympic Games. Through the above work, many indicators of the six Olympics host cities, such as the popularizing rate of special merchants and the growth rate of the total quantity of merchants and equipment were generally completed ahead of schedule and even beyond the expectations.
Foreign currency exchange services were more convenient. The PBC actively guided the banking institutions to lay out outlets in major Olympics areas, took advantage of such foreign currency exchange agencies as hotels and restaurants and unified individual Renminbi and foreign currency exchange service logos; simplified the procedures for foreign currency exchange, allowed exchange agencies to handle non-resident reconversion business, and softened its policies on stock quota management and exchange rate; allowed domestic non-independent legal entities to conduct individual Reminbi and foreign currency exchange business after being authorized by the legal institutions and domestic banks that they belonged to. The PBC guided to centralizedly introduce foreign professional currency exchange companies to foreign tourists in Beijing, Shanghai, Qingdao and other airports to take advantages of long business hours, a wide variety of currencies and professional services; to meet the actual needs of individual foreign exchange business during the Olympic Games, streamlined the procedures for conducting individual settlement and sales of foreign currency exchange, overseas individual’s purchase of foreign currency exchange and unspent Renminbi reconversion less than 10 thousand US dollars each; two-way exchange was realized in bank outlets and airport exchange agencies.
Various payment and clearing systems better met the needs of the Olympic Games payment services. The PBC organized relevant operating agencies to improve and implement emergency plans for various payment and clearing systems, carried out risk assessments and took emergency drilling one by one for risks points in the Olympic Games-related business systems; inspected power protection, line flow, network security, engine room security and other key links one by one and effectively improved the ability to deal with unexpected risk events, thus providing a strong guarantee for safely and efficiently handling various payment and clearing transactions during the Olympic Games.
The soft environment for financial services was improved significantly. During the Olympic Games, banking institutions especially offered financial service time guarantee for the areas close to Olympic venues, hotels, restaurants and bustling shopping centers by appropriately extending business hours; the PBC’s Small-sum Payment System supports the large-sum payment transactions on holidays by such means as cancelling the upper limit of credit business amount; set up special counters for Olympics-related financial services in bank outlets in major Olympics areas, and took such measures as unified and standard bilingual service logos, free Chinese and English service-guides and consultation and complaint platforms, thus effectively improving the soft environment for financial services.
During the Olympic Games, the financial sector succeeded in providing high-quality, convenient, safe and efficient payment services for domestic and foreign organizations and individuals and showed to the world China‘s achievements in the payment system construction and its level of payment services. The construction of Olympics payment environment also led to further optimization of the national payment environment and consolidated the achievements of the construction of China’s payment infrastructure.
2.6 Major disaster emergency was handled timely and properly
In 2008, in fighting against the frozen disaster that occurred in some southern provinces (municipalities), in particular the Wenchuan earthquake and the support for post-disaster reconstruction, the PBC made decisions resolutely and responded timely, thus ensuring the efficient, stable and continuous operation of the payment system and providing the people, enterprises and financial institutions in the affected areas with high-quality payment and clearing services and policy supports.
First, the PBC timely launched the payment and clearing system emergency response plans, ran the large-sum payment system as usual on holidays, loosened up the upper limit of the amount of credit transactions in the small-sum payment system, fully protected the safe and stable operation of the payment system, and opened a “green channel” for the timely allocation of funds for disaster relief. Second, the PBC effectively implemented the decision of the State Council on granting subsidies to the people with difficulties in the earthquake-stricken areas, specially opened up special payment channels and issued an urgent notice requiring the PBC’s branches in the affected areas to actively coordinate the local government and banking financial institutions in earnestly doing a good job in collection of the identity information of affected people, opening of accounts of receiving subsidies and allocation of subsidies, etc. to make subsidies allocated rapidly, accurately and automatically. Third, the PBC timely organized to develop a series of policies and measures on restoration of payment and settlement orders and protection of the interests of the people and enterprises in the affected areas.
2.7 Supervision on the payment system was further enhanced
Routine supervision on the participants of the PBC’s large-sum and small-sum payment systems was strengthened. In order to clarify participants’ responsibility, prevent payment risks and ensure the safe and stable operation of the payment system, the PBC elaborated the relevant implementation requirements for the Administrative Measures for Acceding to and Quitting the Payment System by Banking Financial Institutions (for Trial Implementation) and other regulations, and focused on strengthening routine supervision, establishing a sound evaluation mechanism and enhancing the management of the payment system participants while strictly implementing the access and quitting standards. Some branches of the PBC also, based on the actual conditions in their respective jurisdiction, developed assessment methods for the payment system participants, organized business knowledge examinations for the participants, established a regulatory system for conversation, and took the form of information disclosure to regularly assess and announce the participants’ compliance with relevant rules, which are conducive to the organic combination of compliance regulation and prudential supervision and the timely detection and control of accidents and hidden dangers.
Supervision and management of illegal acts in the payment and settlement field were enhanced. In 2008, the PBC and the Ministry of Public Security jointly launched a dedicated campaign to combat bankcard crimes, thus effectively striking and deterring bankcard crimes, improving the risk and case prevention and control level of bankcard institutions, enhancing the public’s awareness and skills of safe use of cards, and maintaining the public’s confidence in payment instruments. Meanwhile, the PBC punished 136.6 thousand rubber cheque acts according to law, inhibiting the acts of signing and issuing rubber cheques and maintaining the credibility of cheques. In addition, the PBC started to carry out the national verification of the relevant personal identity information of the accounts for settlement of inventory in batches and in phases in Tianjin and Chongqing as from October 2008. By January 12, 2009, the first five provinces (autonomous regions and municipalities) carrying out verification had successfully completed the first phase of verification, verifying a total of 1.72 million accounts, accounting for 95% of the accounts to be verified, which played an active role in effectively implementing bank account real-name system and promoting the establishment of anti-money laundering and social credit systems.
Dedicated Campaign in Jointly Combating Bankcard-Related Crimes
In order to ensure the safe use of bankcard during the period of Olympic Games and promote the healthy development of bankcard business, the PBC and the Ministry of Public Security carried out a dedicated campaign to jointly combat bankcard-related crimes (hereinafter referred to as the Campaign) in China, especially for the six Olympic Games host cities and some major tourism cities, from April 1 to September 30, 2008. During the Campaign, the PBC and the Ministry of Public Security set up an office for dedicated campaign to jointly combat bankcard-related crimes (hereinafter referred to as the Office), making a series of special deployment and arrangements for supervision and inspection, publicity and training, emergency drills, case information submission and handling, establishment of long-term mechanism, etc. Corresponding local offices were set up in local regions, relevant work was actively organized to be carried out and remarkable achievements were made.
First, the bankcard business risk management and case prevention level was improved in all aspects. Each bankcard operator carried out a comprehensive self-checking and rectification on business risks in such aspects as bankcard business regulations, business systems and business processes, effectively prevented the loopholes and hidden dangers of risk and improved the risk prevention awareness and level of its management and business staff. At the same time, public security organs and bankcard operators in the six Olympic Games cities and some major cities and provinces also conducted the emergency response drilling to improve the operators’ capacity for handling emergent risk events and cases.
Second, the public’s awareness and skills of using cards in a safe manner were effectively improved. Each local office of the Campaign actively organized relevant institutions in its jurisdiction to carry out bankcard publicity and education activities with the theme of “Towards the Olympic Games, Rest Assured Bankcard Using and Safe Payment”, explaining the knowledge of safe use of bankcards and anti-fraud knowledge and skills to the public; extensively distributed and posted uniformly printed brochures by use of banking outlets and residents community bulletin board. 6.53 million brochures were distributed in total across the country, so as to educate the public to improve the ability to identify fraud and the awareness of prevention and enhance cashiers’ skills of proper operation and counterfeit card identification.
Third, major cases were cracked centralizedly and crimes were deterred effectively. During the Campaign, all local public security organs and banking institutions in China combated and defended simultaneously in a comprehensive way, and a large number of major bankcard cases were cracked centralizedly. According to the statistics, during the Campaign, public security organs in China cracked 2,388 bankcard criminal cases, up by 1.09 times over the same period of the previous year, and restored economic losses of RMB 61.61 million Yuan, up by 1.22 times over the same period of the previous year, curbing the trend of high incidence of bankcard crimes and ensuring the realization of the “Safe Olympics” goal.
Fourth, information communication and inspection and supervision were enhanced to ensure that the Campaign would achieve substantial results. During the Campaign, local offices of the Campaign submitted 471 brief reports on cases and work information in total, and the Office, after screening and summarizing, compiled and distributed 54 brief reports on the Campaign in China. The Office also led and organized some bankcard operators to set up inspection groups to conduct a field inspection on relevant work of the Campaign in 14 provinces (municipalities) such as Beijing, Tianjin, Shanghai, Zhejiang, Shandong and Yunnan and inspect and accept in a netting way the issuance of cards by commercial banks and the safe acceptance of bankcards around main streets and tourism areas.
Fifth, the protection of safe payment with bankcards during the Olympic Games was fully deployed to ensure the safe use of bankcards during the Olympic Games. To ensure smooth realization of the “Safe Olympics” goal, the PBC, upon negotiation with the Ministry of Public Security, issued the Circular of the General Office of the People‘s Bank of China on Strengthening the Protection of Bankcards during the Olympic Games and the Circular of the General Office of the People‘s Bank of China on Further Preventing Counterfeit Bankcards Crimes during the Olympic Games, carefully arranging for the preventing and combating of bankcards risk events during the Olympic Games and a period of time after the Olympic Games. Meanwhile, the PBC also established a response mechanism for bankcard emergent risk events during the Olympic Games, formulated the Emergency Response Plan on Bankcard Emergent Risk events during the Olympic Games to improve the capacity of parties concerned to quickly handle the emergent risk events.
Sixth, the collaboration between public security organs and banks was closer and a bankcard crime prevention and control system was preliminarily established. Through the Campaign, the PBCs, public security organs, commercial banks and other institutions in most regions of China established a joint conference system, thus preliminary forming the warning judgment of bankcard crimes, the announcement of illegal and criminal conditions, the collaboration of case investigation, prevention publicity and education and other cooperation mechanisms. Some local public security organs and local card-issuing banks established bankcard Quick Search green channel and information exchange systems and set up bad credit person information database to speed up the response to bankcard crimes. The economic investigation department of each public security organ also carefully sorted out and analyzed the means and features of bankcard crimes and the weakness in its work, informed the relevant banking institutions and made recommendations for prevention, to work together to prevent and crack down on illegal and criminal bankcard-related activities.
2.8 International exchange and cooperation were expanded increasingly, and payment and settlement cross-border cooperation mechanism was enhanced continuously
The domestic foreign currency payment system was established based on advanced international experience, and cross-border supervisory cooperation was carried out in accordance with international standards. During the establishment of the domestic foreign currency payment system, the PBC actively carried out exchange and cooperation with the central banks of other countries and regions, creating a favorable external environment for the smooth completion and operation of the system. Meanwhile, advanced international experience was fully learned and international standards and practices were followed or referred to for the payment process design, risk management and regulatory arrangements of the domestic foreign currency payment system. After the domestic foreign currency payment system was established and operated, the PBC timely sent a notice letter to the central banks of relevant settlement currency note-issuing countries (regions), making full communication on the system’s overall architecture, risk management, settlement arrangements, etc. At present, the PBC maintains regular communication with relevant central banks such as Federal Reserve Bank of New York, European Central Bank and Bank of Japan, and has preliminarily established a cross-border cooperation regulatory mechanism for the domestic foreign currency payment system.
The cooperation with neighboring countries in the border trade settlement in local currency was enhanced continuously. By now, the PBC has signed the agreements of border trade settlement in local currency with central banks from eight countries such as Russia, Vietnam and Mongolia, specifying that the commercial banks of a party may open proxy accounts in the ones of the other party on the basis of the agreements, and clarifying the specific procedures and conditions for local currency settlement, cross-border currency note transporting and so on. In order to regulate the management of bank accounts for cross-border transactions in border areas and RMB cross-border circulation, promote the cross-border use of non-cash payment instruments, the PBC formulated the regulations on the issues related to the opening of RMB bank settlement accounts by overseas border trade enterprises and individuals, further meeting and standardizing the needs of border trade fund settlement. These systems and arrangements effectively increased the settlement amount in local currency in the border trade, and the payment and settlement transactions which had been generally conducted through informal channels in the past were also included into the banking system to facilitate and promote the development of border trade.
The PBC actively participated in the meetings of the Working Group of Payment and Settlement System of EMEAP. In 2008, the personnel from the PBC attended the eighteenth and nineteenth meetings of the Working Group of Payment and Settlement System (WGPSS) of EMEAP. The participants in the meetings discussed the recent important developments, existing prominent problems of and challenges to the payment system of the central banks (monetary authorities) of all Members, particularly the direct or indirect influence on the payment and settlement system of the EMEAP region made by the recent financial turmoil, the risk management of the payment system (mainly the payment system) and other strategic issues, exchanged supervisory experience, and, with reference to some provisions of the Core Principles for Important Payment Systems, exchanged the relevant standards and best practices.
The bankcard issuance volume continued to grow, but the growth rate obviously slowed down. By the end of 2008, 1.8 billion bankcards had been issued in total, up by 20% on year-on-year basis, in which 1.658 billion debit cards had been issued, accounting for 92.11% of all bankcards, up by 17.59% on year-on-year basis, of which the growth rate decreased by 12.81%, and 142 million credit cards had been issued, accounting for 7.89% of all bankcards, up by 57.32 % on year-on-year basis, of which the growth rate decreased by 24.68%. Generally speaking, the bankcard issuing rate slowed down and the percentage of credit cards in bankcards was further increased. Affected by the global financial crisis, commercial banks generally began to pay attention to credit card risk control, issuing cards more cautiously. And the issuing growth rate also declined.
Bankcard acceptance environment was further improved and application scope continued to be broadened. By the end of 2008, there had been up to 1.1817 million special merchants, 1.8451 million POS machines and 0.1675 million ATMs in China, respectively, up by 59.9%, 56.2% and 28.4% over the end of the previous year; bankcards corresponding to each ATM reached 11,400 pieces and bankcards corresponding to each POS machine 976 pieces. Bankcards were rapidly promoted in the field of utilities, and payments based on the Internet, cell phones and telephones developed rapidly.
The bankcard transaction volume continued to grow, but the growth rate obviously slowed down. In 2008, there was 16.67 billion RMB bankcard transactions, totally RMB 127.16 trillion Yuan, respectively, up by 22.47% and 14.08% on year-on-year basis, accounting for 90.96% and 20.09 % of all non-cash payment instrument business volume which was up by 2.86% and 1.29% over the previous year, indicating more extensive use of bankcards; from the transaction structure, the volume and amount of consumption transactions in 2008 respectively accounted for 15.87% and 3.10% of the volume and amount of bankcard transactions, up by 3.08% and 0.41% on year-on-year basis, indicating that the bankcards’ functions used in consumption payment were shown gradually.