Prepaid card regulation misses mark

Updated: 2012-01-17 07:46

By Wang Zhenghua (China Daily)

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Many loopholes remain to get around rule

SHANGHAI - A rule that requires prepaid-shopping-card buyers to register their real names is thought to be making little headway in fighting corruption because of lax supervision and the lack of supporting policies.

In a bid to prevent money laundering, tax evasion and bribery, the State Council required in May 2011 that issuers of shopping cards register customers' identities if they purchase more than 10,000 yuan ($1,600) worth of cards.

The face value of an anonymous card should be below 1,000 yuan, and a card bearing the user name should not exceed 5,000 yuan in value.

In addition, an organization that buys more than 5,000 yuan worth of cards at one time and an individual who buys more than 50,000 yuan should pay through bank account transfer.

The regulation has to some extent reined in the trend of excessive issuance of shopping cards.

"Compared with last year, there has been a major decline in cards issued since June," Zhao Hua, the head of bulk-buying service center at Beijing's Grand Pacific Mall told Beijing People's Broadcasting Corp last week.

"It has been effective since the implementation of the regulation," he added.

However, in real practice, it is not hard for card buyers to get around the rule and proceed with the card purchase without revealing their identities.

One of the most common approaches is to buy multiple cards worth 1,000 yuan or less, which means buyers do not need to reveal their identities.

The rule has had little effect on the shopping cards purchased by companies and given to employees as a way to evade taxes and the public will hardly know the exact amount of salaries of State-owned companies' employees - nowadays the public is complaining a lot about the high income of State-owned company employees, according to an employee who works for a State-owned enterprise in Beijing.

"Last year we each received 30,000 yuan worth of cards. Following the rule, each card given to employees had a face value of no more than 1,000 yuan," said the employee, who requested anonymity out of fear of retaliation from the company.

For the upcoming Chinese Lunar New Year, that company has decided to hand out more shopping cards worth thousands of yuan to each employee.

Besides, it is far easier to resell or purchase prepaid cards from scalpers. The operator of, a website profiting from card transactions, said on Monday that the daily transactions have achieved "big volume". Scalpers are common in front of almost every big department store in Shanghai.

Another important reason is that the income from prepaid cards contributes considerably to the total income of supermarkets and department stores and therefore they are unwilling to fully implement the regulation.

In a report released in 2010, China Union Loyalty, a company specializing in prepaid-card services, said the revenue from prepaid cards accounted for 30 percent of the total revenue at China's big department stores. In the supermarkets, the ratio stood between 9 to 20 percent in 2010.

According to the 2010 annual report of Lianhua Supermarket Holdings Co, a Hong Kong-listed mainland China firm, the advanced payment it received from its OK Cards - the shopping cards it issues - stood at 870 million yuan, or about one-third of its total income for fiscal 2010.

Nationwide, the amount of prepaid cards sold surpassed 1 trillion yuan in 2011, the Ministry of Commerce estimated at the beginning of 2011.

Professionals in anti-corruption studies said the real-name registration could not have real effects if only the buyers, rather than user - or scalpers - of these cards, were forced to reveal their identities.

"It's important to supervise how the cards circulated from issuers to users," said Ren Jianming, an expert on clean governance Tsinghua University in Beijing.

High-ranking civil servants were also urged to disclose the information if they purchase or use prepaid cards, Ren said.