Beijing made the right decision last week in deciding not to oppose a World Trade Organization (WTO) ruling that it unfairly supported its domestic UnionPay financial transactions network at the expense of foreign rivals like MasterCard and Visa. Now it needs to show it is prepared to wean its other big industries from unfair State support.
Beijing surprised some last week when it decided not to fight the WTO's July decision that China discriminated against companies like Visa and MasterCard by severely limiting their access to the huge market for settling transactions denominated in the Chinese currency.
China has built up UnionPay as a domestic equivalent of Visa and MasterCard over the last decade, giving the company nearly exclusive access to its fast-growing domestic market as it tries to create homegrown companies capable of competing globally. UnionPay has even embarked on its own overseas drive over the last five years, signing a steady stream of new tie-ups with big foreign banks with little or no opposition from Western governments that welcome this new competitor.
Foreign governments have also demonstrated their desire to make sure that their own markets remain competitive and don't become dominated by companies like Visa or MasterCard the way that UnionPay now monopolizes China. They demonstrated that commitment in July, when MasterCard and Visa, fearing they would lose an anti-trust case against them in the US, agreed to pay more than $6 billion and modify their practices to settle a lawsuit filed by millions of credit card merchants.
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