Foreign companies such as American Express Corp, MasterCard Inc and Visa Inc hope to enter China's yuan-denominated bank card clearing market, which is worth $73 trillion a year. [Photo / IC]

Foreign companies such as American Express Corp, MasterCard Inc and Visa Inc hope to enter China's yuan-denominated bank card clearing market, which is worth $73 trillion a year.

Framework rules were published by the State Council on Wednesday, which could open up an industry that is dominated by China UnionPay Co Ltd.

Under existing regulations, the company is the only clearing service provider for yuan-denominated bank card payments.

"Foreign clearing services providers may join the market by applying for licenses, which will add more brands (and provide more) competition," the People's Bank of China, the country's central bank, said in a statement. "The opening-up will accelerate the China payment market's reforms and innovations."

From June, foreign companies can apply for bank card clearing services by setting up Chinese branches or acquiring a local partner, according to the rules.

By the end of 2014, there were 4.9 billion bank cards in China with transactions totaling 449.9 trillion yuan ($73 trillion). About 48 percent of retail purchases were paid through bank cards compared with 4.7 percent in 2002 when they first became popular, PBOC data showed.

Under the new rules, the central bank hopes to increase competition in the industry and provide a better service for Chinese consumers.

So far, foreign companies with a standard bank card clearing system and registered capital of at least 1 billion yuan will qualify for bank card clearing facilities in China.

Clearing companies connect banks, shops and card users. They settle transactions by turning the promise of payment into the actual transfer of money from one bank to another. Clearing companies make profits by charging commission on these transactions.

Although the new policy is still short of details, a more extensive framework of rules will be introduced later this year, according to the PBOC.

"We are hopeful these new regulations will permit additional participants in the Chinese domestic market," Visa said in a statement on Wednesday. "Visa will review the new regulations and looks forward to further implementation details to be published by the relevant authority. Visa's long-term commitment to our client financial institutions and business in China remains unchanged."

A spokesman for American Express from its Shanghai office said the company would be reviewing the rules with great interest.

The move to open up the credit card clearing market came after the United States government brought a case to the World Trade Organization in 2012. The US challenged China's requirements that foreign card companies must use China UnionPay's network for yuan-denominated transactions.

In July 2012, the WTO told China to stop discriminating against foreign payment companies.

A statement on Wednesday by China UnionPay said it supports the State Council's decision to open up the bank card clearing market.

Established in Shanghai in 2002, China UnionPay has more than 4.6 billion bank cards, which can be used in more than 150 countries and regions, according to its website.