Gift cards are a sensitive topic in this gift-giving season of Chinese New Year, as the government's anti-corruption campaign hits some gift card spending. Our reporter Feng Xin gets us the outlook for the industry.
One week before Chinese New Year, a woman wanders outside a major shopping mall in west-central Beijing, asking passers-by if they'd like to cash in any gift cards by selling them at a discount. She looks at the cards, and they walk off together.
Two scalpers who spoke on condition of anonymity say their business has declined by two thirds this year. That’s after last year when each of the scalpers could exchange between 60,000 to 90,000 yuan in gift cards every day.
The picture is much different for Yufu Payment, one of Beijing's two major prepaid card companies. The company's issuance and sales of gift cards actually went up 85 percent in 2013.
"Chinese people pay a lot of attention to gift giving and receiving during the holidays. We saw a significant boost in sales during the holiday season," said Tong Lu, assistant to president of Yufu Group.
The latest available research on gift cards was done by a private consulting company in 2011.
The company says the market for single-purpose cards; that is, cards that a store issues for use only within its own doors - is expected to reach 1-point-8 (T) trillion yuan in 2013. That's 30-percent growth from 2010.
The smaller multiple-purpose card market, like the cards issued by Yufu Payment, is expected to reach 300 (B) billion yuan in 2013. That's three-fold growth from three years ago. Multiple-purpose cards are issued under a license authorized by China's central bank and can be used in a variety of shops.
Growth for the single-purpose card market, however, is experiencing a bigger slowdown.
"The single-purpose card has been around for a long time but suffers from old age and anti-corruption efforts. The government campaign has impacted card demand," said Wang Weidong, senior analyst of Iresearch.
The one-mile financial street in the heart of Beijing pretty much houses the complete business chain of gift cards. From prepaid card companies who issue gift cards, to shopping malls and to scalpers who wander around the area, the chain can get quite extensive.
Prepaid card issuers profit from bank interest and commissions paid by shops. Customers see the cards as an effective form of employee benefits or gifts because the taxes are lower. And when the card holders want to cash out, scalpers are happy to scoop up the cards and sell them elsewhere for a profit.
"I think the scalpers will in fact stimulate growth of the prepaid card industry because they extend the demand for prepaid cards. They make these cards have one more function, which is to turn into cash," said Wang Weidong.
The extra grey area largely remains unregulated, however. The Prepaid card Regulatory Committee says complete data on China’s prepaid card market won't be available until this spring. That's when most listed companies issue their yearly reports.
Source: CCTV
