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Low revolving credit card use, bad debt and low interchange rates present challenges for the Chinese credit card market, according to report from Celent, a U.S.-based financial research and consulting firm. In its report "The Chinese Credit Card Market," Celent estimates that Chinese banks since 2003 have issued credit cards to 38 million consumers. The reports cites the "tremendous potential for growth" for China's credit card market, especially as some 200 million Chinese by 2010 could have annual incomes of more than US$2,000 (1,340 euros). "These people are potential credit card customers," the report says. Still, the credit card interchange rates applied to merchant acquirers and paid to card issuers in China typically run between 0.7% and 1% of sale, lower than the 1.5% and 2% seen in other Asian countries, Celent notes. Moreover, "the revolving credit usage rate is relatively low [in China], so net interest income accounts for only about one-third of the total credit card income," the report adds. Bad debt also is an increasing problem. "China Merchants Bank, one of the most successful banks in the credit card business, had a nonperforming rate of credit card receivables of 2.8% in December 2008," the report says, "while in December 2007 it was only 1.9%."
