The widening divergence between China and the West in recent years is not just about politics and ideology. Even the technologies that make everyday life possible have moved apart. 

For years, foreign visitors to China have been unable to use Western credit cards to pay in many restaurants and shops. That’s because Chinese vendors typically require customers to pay using mobile payment systems available only to those with a Chinese bank account.

With tourist numbers to China now in sharp decline, that situation is finally changing. In July, China’s largest mobile payments system Alipay announced partnerships with Visa and Mastercard which allow users to link foreign cards and bank accounts to Alipay’s electronic wallet.

The agreement has been long in the making. Mastercard and Visa first announced in 2019 that they would work with Chinese mobile payment systems to allow its customers to participate in the cashless economy. But the mobile payment systems did not allow overseas bank account holders to directly link their accounts to the apps until this year.

The current Chinese payment system is far advanced compared to America’s payment system and generally ahead of the rest of the world as well.

Aaron Klein, a senior fellow at the Brookings Institution

The increased access for major Western credit card firms should make it easier for non-Chinese residents to participate in the country’s economy. However, it also raises questions about whether overseas consumers will be willing to entrust significant amounts of personal data to corporations subject to Beijing’s data privacy laws, which mandate that private corporations must turn over consumer data at the government’s command.

“The Chinese government can just request wholesale data, if you like. And these companies have to turn it over,” says Elisabeth Braw, a senior fellow at the American Enterprise Institute.

The pace of development in China’s payment systems has been rapid. Until twenty years ago, very few Chinese citizens owned a credit card, while debit cards could only be used to withdraw cash — and then only in one’s hometown. Money transfers were costly and required a trip to a bank or post office. In 2000, Chinese citizens used a credit card for less than 10 percent of their purchases of consumer goods.

Credit cards are still relatively rare in China, but not because the nation still relies on paper money. 

“China had a payments revolution. They leapfrogged magnetic stripe cards and went straight from primarily cash to a digital payment QR system” says Aaron Klein, a senior fellow at the Brookings Institution who has published on China’s mobile payments system. These apps, primarily Alibaba’s Alipay and Tencent’s WeChat Pay, “move money instantly and seamlessly between most of their population. The current Chinese payment system is far advanced compared to America’s payment system and generally ahead of the rest of the world as well.”

Since Alipay and WeChat Pay were launched in 2003 and 2013 respectively, they have become ubiquitous. Some 92 percent of Chinese consumers now use the services as their primary payment method, according to financial technology platform Adyen. In 2013, consumers used mobile payment apps for transactions totaling $2 trillion; in 2021, transactions totaled $43 trillion, according to figures published in Asian Economic Papers and a report from research firm Analysys. 

Klein says Chinese payment apps have transformed the country’s consumer economy, fostering both egalitarianism and efficiency compared to economies dominated by credit card payments. That’s because anyone can use the mobile payment systems, even those without a smartphone. Panhandlers on the streets of Chinese cities sometimes display printed QR codes instead of a collection cup, Klein says, allowing sympathetic pedestrians to make direct bank transfers to them.

“America’s unique credit card reward system lavishes money on the wealthy who qualify at the cost of everyone else. An Amex swipe is often 3 percent of a purchase. The Chinese system is free,” Klein says. “In China, the money moves instantly, with no fee. For the most part in America, there are huge fees in retail payments” which vendors are obligated to pay.

Yet while mobile payments apps have made transactions more convenient for Chinese consumers and vendors, they have made traveling to China more difficult for foreigners. Until recently, WeChat Pay and Alipay both required users to register a Chinese bank account to make payments, an impracticality for short-term visitors. 

Some tourists and expats have resorted to workarounds to complete routine transactions. On a recent trip to China, Dimitrios Buhalis, a professor of smart tourism at Bournemouth University Business School, says he was unable to use the mobile payment apps, so paid cash to a friendly waitress, who then used her own payment app to settle his bill. “During Covid, digitization went really, really fast,” he says.

The mobile payments revolution, along with other factors, has made it “more and more difficult to participate in Chinese life as an outsider,” says Ian Johnson, the author and Pulitzer-prize winning journalist who has traveled to and lived in China, on and off, since the 1980s. “Entering China is like entering a parallel world of different apps and different ways of doing things… it’s going to certainly discourage casual travelers and tourists, and it’s also going to discourage exchange students.”

The difficulty of making payments in China as a foreigner is one reason commonly cited for the sharp fall in tourists visiting the country. During the first five months of this year, just under a million overseas tourists visited Shanghai, for example — only a quarter of the corresponding figure from 2019, according to data from the Shanghai government.

The situation for foreign visitors is now improving. Since Alipay announced its partnership with Visa and Mastercard in July, foreigners have been able to use overseas bank accounts and cards with the mobile payment platform. Four travelers and expats living in China told The Wire that they have been able to successfully use Alipay for payments, making everyday transactions easier. 

Yet the improved availability of Chinese payment apps raise questions about whether the personal information of Visa and Mastercard customers will be protected.

WeChat Pay is run by WeChat, China’s primary messaging platform. When users send a message on WeChat, the platform filters the content through the servers of its parent company Tencent, which check for blacklisted keywords, according to The Citizen Lab at the University of Toronto. WeChat can suspend or block user accounts which try to disseminate politically sensitive content, in turn preventing users from accessing their digital wallets.

During the Covid-19 pandemic, the Chinese government partnered with WeChat Pay and Alipay to set up ‘health codes.’ This system required large swaths of the population to scan a QR whenever they entered a shop or restaurant or traveled within the country, allowing the government and local police to track the movements of hundreds of millions of people. 

Payment apps, by nature of their technological sophistication and the fact that they are tied to consumer cell phones, are a data privacy nightmare, says the AEI’s Braw. 

“I’m astonished every time I see Alipay available at CVS, which it is, because it’s unlike credit cards or cash,” she says. “It’s an app, and apps store data about you. That’s just the nature of an app.” 

Braw notes that Chinese payment apps have not guaranteed that the data of Western consumers will be exempt from Beijing’s legal right to demand user data from Chinese companies, as outlined in the nation’s 2017 Cybersecurity Law. “That’s what makes Chinese companies different from Western ones, even if they have the best intentions when it comes to keeping your data safe. Because they are Chinese companies, they are obliged to turn data over should the government request them,” she says. 

Because they are Chinese companies, they are obliged to turn data over should the government request them.

Elisabeth Braw, a senior fellow at the American Enterprise Institute

When asked if the data of Mastercard users will be made available to the Chinese government, a spokesperson for Mastercard said, “That information remains private,” but added that “when a card transaction is processed, all that is seen is the card number, the date, the amount, the merchant name and the location. There is no identification of the individual and there is no insight into what the person purchased.”

Mastercard’s Global Policy Notice says that the company may share user data with “service providers acting on our behalf” and “third parties whose features [consumers] use in connection with our products and services.”

Even so, western financial corporations’ refusal to guarantee that they will shield user data from the Chinese government worries Braw. “They’ve been so cagey about this,” she says. “It’s not exactly confidence inspiring.”

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