The payment system in China

China's banking system has undergone significant changes in the last two decades: banks are now functioning more like banks in developed Western economies than before. Since 1979, China's previous mono-bank system has been transformed into a two-tier banking system, consisting of the People's Bank of China (PBC) as the central bank and many other providers of financial services such as the four major state-owned commercial banks, public-owned commercial banks, co-operative banks, policy banks and branches and representative offices of foreign banks. Nevertheless, China's banking industry has remained in the Government's hands even though banks have gained more autonomy. China's accession to WTO will lead to a significant opening of this industry to foreign participation. To complement the establishment of the two-tier banking system, payment systems in China have changed from an accounting mechanism for keeping a record of centrally planned economic activities into a payment system suitable to a market-oriented economy.1 Evolution of China's payment systems has been influenced by the environmental and cultural factors as well as the difficulties imposed by the country's size, economic conditions and infrastructure, etc. This article starts with the role of the central bank of China, and puts focus on the main structure of China's payment system to demonstrate the advantages and disadvantages of each sub-system. It also reviews the credit card system of China. In the end, it examines the key issues in relation to the operation of the payment system and also illustrates some possible suggestions in relation to the improvement of China's payment system.