China’s banks converted more than CNY1 trillion of debt into stock holdings in more than 70 state-owned enterprises (SOEs) in the government’s largest debt-to-equity swap effort to bail out the country’s most indebted borrowers. The scheme, signed between Chinese banks and companies in the steel, coal, chemicals and equipment manufacturing industries, has helped to lower the aggregate debt ratio in these industries, according to the National Development and Reform Commission (NDRC). China’s 2016 corporate debt soared to about 170% of gross domestic product (GDP), from 100% in 2008, according to the Bank of International Settlements (BIS). At double the average of other economies, the aggregate debt of China’s state-owned enterprises (SOEs) and private companies stood at USD15.7 trillion last year. The government is anxious to reduce the debt owned by the state sector to shield the country’s financial system from the risks of defaults. The debt-to-equity swaps were used previously, during the 1990s, to clean up the books of China’s state banks. What’s different this time is the swaps would proceed under market principles, giving banks and financial institutions a bigger say in choosing the indebted companies whose borrowings were to be swapped, and in fixing the financial terms of the swaps. This was done to avoid channelling funds into so-called zombie companies that were inefficient and destined for bankruptcy. Still, under draft rules, the China Banking Regulatory Commission (CBRC) aims to manage the process. For example, some banks have channelled funds they raised through wealth management products from retail investors into the debt-to-equity swap programs. It is not known whether that practice is allowed under the CBRC’s latest draft rules, the South China Morning Post reports.

Visa has become the first overseas card payment company to apply for a bank-card clearing operation in China, reflecting growing challenges to domestic market leader China UnionPay after deregulation. “Visa has filed an application with the People’s Bank of China to participate in the Chinese domestic market as a bank-card clearing institution,” the U.S.-based card payment firm said in a statement, noting its long-term commitment is to grow in China – one of the world’s fastest growing payments markets and the one that many analysts consider is now leading the way in payments innovation. Visa expects the central bank to consider its application in line with the publicly released measures and guidelines for bank-card clearing institution applicants, it said, referring to the latest card payment guidance posted by the central bank on June 30. China’s growing bank card market has attracted various overseas players, which had been able to cooperate with banks to issue dual currency cards in China, but they have been long barred from setting up payment clearing operations in the country. The entry of foreign players will increase competition, but it is still uncertain if they can realistically challenge the dominance of UnionPay, according to Wang Pengbo, Analyst at Analysys. Global rival Mastercard is now also looking forward to “prompt and full market access”, the South China Morning Post reports. At the end of the first quarter, China had 6.3 billion bank cards in circulation, up 11% compared to a year ago. That means that each individual holds 4.53 bank cards on average. In that first quarter, bank card transactions rose to CNY15.2 trillion, up 14%.

Beijing is China’s “smartest” city for cashless payments with consumers using e-wallets everywhere from vegetable markets to hotels, according to a 34-city survey by tech firm Tencent, French market research firm Ipsos and Renmin University’s Chongyang Institute for Financial Studies. The survey asked more than 6,500 people about their payments for a range of goods and services, including takeaway food, restaurant dining, telecommunications and transport. Beijing topped the list for penetration of cashless payments, followed by Shenzhen and Guangzhou in Guangdong province, and Shanghai. Two other Guangdong cities – Dongguan and Foshan – also made it into the top 10. About half of those surveyed used cash for about 20% of their monthly spending, and four in 10 carried less than CNY100 in cash when they left the house. About seven in 10 respondents said they could go for more than a week with just CNY100 in cash, and 84% were comfortable going out with just their mobile phone for payments. Convenience stores and even vegetable vendors accept WeChat or Alipay. Mobile apps can also be used to buy a subway card or a ride on a shared bicycle.

The time is now right to allow greater volatility in the Chinese currency’s exchange rate with the dollar, according to a front-page commentary in the China Securities Journal, a newspaper run by the Xinhua News Agency. The Chinese government has been on the defensive over the value of the yuan for nearly two years after the abrupt 2% devaluation of the currency in August 2015. The Chinese government has taken a slew of measures, from draconian curbs on capital outflow to the adoption of opaque and complex changes to the yuan exchange regime, to keep the currency from weakening sharply. But the China Securities Journal now said that “the one-sided bet on yuan deprecation has been broken. Cross-border capital flow has been stabilized and improved in the first half, while supply and demand in the forex market has basically balanced – it is in the most balanced period for the past three years. It is good timing for China to boost yuan exchange rate flexibility in the short term.” The yuan has already advanced to a nine-month high against the U.S. dollar. China’s foreign exchange reserves have also been stabilized at a level of USD3 trillion over the past months. Zhang Xiaohui, Assistant Governor of the People’s Bank of China (PBOC), wrote in an article that the authorities would “unswervingly” push ahead with yuan exchange rate liberalization to give the market a decisive role in deciding the yuan’s value, the South China Morning Post reports.

While Chinese consumers have enthusiastically embraced mobile payments at home, they are reluctant to use them while traveling abroad. Security concerns rank highly when using mobile payments overseas, with more than 37% of respondents to a survey admitting they were “not confident that it is secure or not”. Western brands have been slow to adopt Chinese mobile payments, due in part to their lack of awareness of how big mobile payments are in China. The mobile payments market is dominated by Tencent (WeChat Pay – 40%) and Alibaba (Alipay – 54%), with Apple trying to expand its tiny market share. WeChat Pay is now available in 15 countries and regions for payments in 12 currencies, while Alipay is accepted in 26 countries. Alipay was originally created by Alibaba to support its successful e-commerce platforms Taobao and Tmall, whereas Tencent’s WeChat is comparable to Whatsapp, with 800 million users.