By Lingling Wei and Chao Deng
BEIJING -- American Express Co. won approval to set up card-clearing services in China -- the first U.S. card network to gain permission -- as Beijing seeks to show progress in opening its markets ahead of a summit between the Chinese and U.S. presidents.
The approval, announced Friday by China's central bank, comes more than a decade after Beijing promised to open the sector and more than a year after it pledged anew to do so -- part of a package meant to forestall the tougher trade measures President Trump has since imposed.
With the permission, AmEx will form a 50-50 joint venture with Chinese fintech firm Lianlian Group to set up the payment network. More hurdles await: After building the network, the venture will need a separate approval for a business operating license. Chinese regulators give AmEx up to 15 months to build the clearing network, said AmEx spokesman Fritz Quinn. He said the company would work with that timeline.
Once running, the AmEx network will join a market with nearly 7 billion bank cards in circulation, with government-owned China Union Pay Co. commanding more than 90% of the market. Mastercard Inc.'s application for a similar joint-venture is pending, as is Visa Inc.'s to form a wholly owned entity in China.
Beijing and Washington are looking to the meeting between presidents Xi Jinping and Donald Trump at the end of the month to ease a trade conflict that has battered global businesses and investors as well as damaged the bilateral relationship.
Approval of the AmEx deal was timed to get out ahead of that summit, a Beijing official said. He called it a "goodwill gesture." In its announcement, the People's Bank of China said the permission represents "an important step" toward liberalizing China's clearing industry.
So far, on-and-off trade negotiations have shown scant progress. The U.S. has placed punitive tariffs on more than half its Chinese imports and is threatening penalties on the rest. Meanwhile, China, which imports far less, has slapped tariffs on about 80% of its American imports. Washington has been reluctant to resume the talks until the Chinese side presents a concrete proposal to address the Trump administration's complaints about market access, forced technology transfer and other economic issues.
The AmEx venture and the years it took to get there illustrate many of the Trump administration's criticisms about Chinese trade practices.
AmEx's decision to take on a Chinese partner, instead of forming a wholly owned entity, shows the difficulties foreign firms face in going solo in a market where the government holds sway, said analysts and industry experts. Barriers to foreigners have been high for so long that Chinese institutions dominate many sectors, especially in finance -- be they for payment services, credit rating, brokerages or banking -- sectors where China has said greater foreign participation would be allowed.
In April, People's Bank governor Yi Gang pledged by the end of June to remove the current 49% ownership cap on foreign securities firms' mainland joint ventures. Even so, Chinese regulators have yet to approve any foreign firms' applications, including ones from Switzerland's UBS Group, Japan's Nomura Holdings and the U.S.'s JPMorgan Chase & Co.
For the banks, one hurdle is a requirement that majority owners have at least 100 billion yuan ($14.4 billion) in net assets. Another obstacle, according to a lawyer who advises foreign brokerages: finding financial industry executives that meet Beijing's qualifications, including passing securities exams written in Mandarin.
Joint ventures, like the one being formed by AmEx, have drawn particular ire from some Trump administration officials who see them as a tool China uses to reduce American companies' profits and siphon off their technical know-how.
AmEx has worked with its Chinese partner, Lianlian, as far back as 2012, providing technology to power Lianlian's digital wallets, which Chinese consumers can use to top up mobile phone minutes and pay bills with. Mr. Quinn, the AmEx spokesman, said the firm will have control over the business of the joint venture as stated in its agreement with Lianlian.
Write to Lingling Wei at email@example.com and Chao Deng at Chao.Deng@wsj.com