As part of an effort to ramp up domestic demand, the Chinese government plans to reduce bank card payment fees and issue fee guidelines to banks handling payments.
The Chinese government has contemplated the move for some time, though a recent report by Moody’s Investor Service indicated that the card fee reduction will likely result in a 30 percent decrease in merchant fee income, which could drive down pre-tax profits by one percent to 1.5 percent, Fox News reports.
The fee reduction will take effect on Feb. 25 as the government attempts to reduce distribution costs and grow domestic demand, which is seen as a major economic driver. Retail sales, a key indicator of consumer spending, increased 15.2 percent year-over-year in December, up from 14.9 percent in November, according to China Daily.
An official from China’s National Development and Reform Commission, the nation’s top economic planning agency, said that the move will save Chinese businesses $637 million every year.
Fees paid by department stores and supermarkets will be reduced by 21.4 percent and 25.7 percent, respectively, while fees paid by catering firms will decrease by 35.7 percent. Other industries, such as tourism, gasoline retail, development and auto retail, will also benefit from the reduced fees, and consumers, who are often charged higher prices to offset the fee cost, will also benefit, China Daily reports.
Card transactions at public schools and hospitals will be exempt from the fees charged by payment networks and banks.