Two giants that go hand in hand

Updated: 2012-04-06 07:53

By Hu Haiyan and Ma Wei (China Daily)

 

Two giants that go hand in hand

Alan Tien, general manager of PayPal China, says the settlement center in Chongqing could be a new driver for the company's China business. Provided to China Daily

 

Innovation, strong support from govt form major draws

When PayPal came to Chongqing it was a bit like Godzilla meets King Kong. Those who know nothing about the metropolis in western China are usually dazzled by the fact that its municipal area has a hulking population of more than 28 million and is busting at the seams. It seems appropriate then that the global Internet payment behemoth PayPal, which handled transactions worth $118 billion last year and keeps on growing, should set up shop here.

PayPal's offices are located in a swish office building in the Jiefangbei district, the city's equivalent of Times Square in New York, and its commodious 2,400 square meters set it apart from its space-challenged counterparts in other cities in China.

But what distinguishes PayPal more is the fact that it is the first foreign online payment services company in China to build a foreign exchange settlement platform in cooperation with the local government, so users can pay for international online shopping transactions.

"By setting up the settlement center in Chongqing, we can promote China's exports by helping business owners conduct faster and more convenient cross-border trade and further boost our business in China," says Alan Tien, general manager of PayPal China.

The Chongqing center was set up in December 2010 and now has about 100 staff. The foreign exchange settlement platform handled transactions worth about $10 million (7.6 million euros) last year, says Ju Yan, director of a work team that oversees cloud computing development under the Chongqing Economic and Information Technology Commission.

"Considering the foreign exchange settlement platform is still in its initial stage, this is a remarkable achievement," says Ju, who is also in charge of building the e-commerce foreign exchange settlement platform in Chongqing.

The figure is expected to rise to hundreds of millions of dollars this year, and reach $10 billion within five years, he says.

Tien says PayPal is deeply committed to China, one of its most important markets. "Chongqing is one of the fastest developing cities in China, and the foreign exchange settlement center here will definitely be a new driver to our China's business."

As the world's largest online payment services company and the subsidiary of the US e-commerce giant eBay, PayPal recorded transactions worth $4.4 billion in China in 2010, a 44 percent increase on the previous year, and the third highest in its global market. The figure for last year has yet to be made public.

Its worldwide transactions of $118 billion last year were an increase of 29 percent on 2010.

PayPal has more than 100 million active users across the world and allows payment in 20 currencies. PayPal has a presence in six Chinese cities - Shanghai, Beijing, Shenzhen, Chongqing, Hong Kong and Taipei - with 1,000 local staff.

The Chongqing office is the only one in the country's inland region.

While logistically Chongqing is not as convenient as coastal areas, he says, the development of e-commerce can make up for that. "And compared with the coastal regions, Chongqing has its advantages such as lower costs, sound infrastructure, solid IT industry base and the strong local government's determination to develop e-commerce here."

The innovative thinking and strong support of the local government attracted PayPal to Chongqing, he says.

"Fearing an influx of hot money, China has restrictive foreign exchange settlement policies. But through the local government's unstinting efforts, regulatory approval was given for a settlement service platform by agencies including the State Administration of Foreign Exchange. It's a great innovation and a major breakthrough, a first for China."

The local government has also allowed PayPal to use the offices it occupies free of charge for three years, saving about 5 million yuan.

Tien says the foreign exchange settlement platform is useful because through providing faster and simpler foreign exchange services, Chinese business owners can enhance their capabilities to do cross-border trade. And especially for the small local businesses, their business potential for cross-border trade can be maximized.

Zhu Xingjing, 32, is a typical small-business owner whose life has been made a lot easier by the foreign exchange settlement services PayPal provides.

Zhu, president of starzmart.com, a transnational online retailer based in Chongqing, says that without the service it would have been impossible for him to gain sales of 4 million yuan last year.

His company mainly conducts business in developed countries including the United States and Europe, and had sales of 1 million yuan each from the two markets last year.

"Before this platform was set up, I had to gather dozens of identity cards and went to banks to conduct the currency conversion numerous times (because according to current policy, individuals are allowed to convert to yuan overseas payments of only $50,000 a year). And some bank customers were suspicious I was laundering money, which was very embarrassing."

Zhu, speaking in his office in Chongqing Jiangbei district, a local commercial hub half an hour's drive from the PayPal office, says that now with the help of the foreign exchange settlement center he can make the transactions over the Internet.

"This saves me a lot of time, and we expect to pick up 30 million yuan in sales this year."

Apart from developing a foreign exchange settlement platform with the Chongqing municipal government, PayPal has worked with the local government on establishing five international e-commerce centers to offer other services such as verification, national telesales and merchant training.

Mu Huaping, director of the Chongqing Economic and Information Technology Commission, says the e-commerce hub has been a great fillip to e-commerce in inland China. Chongqing could step up its efforts to develop into the country's international e-commerce settlement center as well as the financial services center of western China, he says.

So far, about 30 transnational online retailers have set up shops in Chongqing and made use of the services PayPal provides.

"I am confident of Chongqing's future and its stable development into an e-commerce center," Tien says. "And we are confident or gaining more from the fast-growing online sales market."

Analysts say PayPal's foreign exchange settlement center in Chongqing will help it consolidate its leading position in the cross-border online payment market and gain a foothold to compete against rivals such as Alipay, a unit of China's largest e-commerce company, Alibaba group.

Lian Xiaojia, an analyst at the IT research company Analysys International, says: "Alipay dominates the Chinese online payment market and had 46.9 percent of the market in the fourth quarter of last year, but in cross-border online payment services, PayPal take the lion's share, 90 percent. The Chongqing center can help it reinforce its status."

 


Alan made a keynote speech on the Innovation & Development Summit for Payment & Clearing Industry China organized by Payment & Clearing Association in Beijing on Apr 10, 2012 with the topic of Leading Mobile Innovation.

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