The last few months have seen clear indications of the changed state of China's payment and settlement systems. Research reported in August of this year by Towergroup found that, following a series of modernizations, China now possesses national payment capabilities worthy of an 'economic powerhouse.' In just ten years China's Central Bank has managed to implement three new payment systems using state-of-the-art technology, providing a national network for high-value payments, bulk low-value payments, and national check-image exchange. As China has historically been prone to inefficient and fragmented payment systems, implementing advanced payment products and infrastructure to cope with China's commercial expansion is a significant step. China has also been able to leverage Hong Kong's advanced infrastructure and banking reputation under the "one country two systems" policy while the separate payment systems of China and Hong Kong have become more integrated.

In the wake of payment system modernization, China's Internet payment systems environment is likewise developing rapidly. However according to Chen Lei of China Payments News (in an article last month on gtnews, needs registration) Internet payment systems in China are fundamentally developed and pursued by banks individually, as a nationwide integrated bank card system (China Unionpay) was only set up in 2002. And though growing in popularity, credit cards as yet make up only a fraction of all bank cards in use in China (0.3% of 500 million bank cards at the end of 2002).

Yet it seems that business for online retailers in China is definitely starting to pick up. According to the Internet Society of China (as presented in an article appearing in Business Week last month), consumer e-commerce in China is set to top $1 billion in 2007 and grow at an average of 34% annually over the next three years. The article also presented figures from market watcher iResearch, which projected that online payments by both companies and consumers in China are expected to triple over the next two years to $24 billion. No doubt the spectacular rise of Alibaba.com will provide further impetus to this process.