Asia Business Channel

PayPal plans to enter China through a local acquisition

 

The Chinese government has approved a plan by PayPal, the US digital money transfer platform, to buy a 70% stake in Chinese payment company GoPay, which has licenses for mobile, online and cross-border yuan payment services.

The approval by Beijing authorities for PayPal to buy a controlling stake in a domestic payments company will make PayPal the first foreign firm to enter China’s payment services market. In March 2018, China’s central bank announced that it was opening the country’s domestic market to foreign third-party electronic payment firms, a move intended to promote competition in the retail payments industry.

PayPal has said that it will make the acquisition through a subsidiary in Shanghai and that the transaction is expected to close in the fourth quarter of 2019, subject to normal financial closing conditions.

The Chinese mobile payments is expected to grow to $96.7 trillion USD by 2023 and PayPal will have to be aggressive in gaining market share since the mobile payments sector is dominated by Alipay and Tencent, which collectively have a 93% market share.

Based upon PayPal’s current management and organization structure in China, it is unclear how PayPal intends to gain additional market share beyond the business already conducted by GoPay.

One of the reasons that Beijing approved PayPal is because the company recently announced that it was withdrawing from the Libra crypto-currency project being developed by Facebook. Facebook is banned in China, and Chinese monetary authorities have said that Libra would be banned in China. If PayPal was a member of the Libra consortium it would have made approval of the GoPay acquisition impossible.

 

 

 

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