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U.S. banks and payments companies are attracted to China's explosive population growth and surging economy, but the country's regulatory climate makes the market a wild card.
May 19
PayPal Inc. is ending its relationship with a unit of the Chinese e-commerce giant Alibaba Group Ltd., the eBay Inc. subsidiary said Friday in a blog post.
After Aug. 3, PayPal will no longer be a payment option for shoppers of AliExpress, a wholesale shopping site that is part of Alibaba.com.
PayPal made the decision to end the relationship, which began last year, "following a routine annual business review," Dickson Seow, the director of communications for PayPal Asia Pacific, wrote on the San Jose, Calif., company's blog. "We have valued the opportunity to work with AliExpress over the past year and wish them well."
Seow did not give a reason for the decision, but Reuters,
The Chinese market has been difficult for foreign payments companies to operate in because of the country's ownership regulations that favor domestic firms.
Yahoo Inc. faced investor criticism recently over its 43% stake in Alibaba after the search-engine giant disclosed that Alibaba had transferred ownership of a key payments subsidiary, Alipay, to an outside entity to meet Chinese licensing requirements.
PayPal's total payment volume in China was $4.4 billion in 2010, up 44% from a year earlier, according to Seow.
EBay Chief Executive and President John Donahoe said Thursday at an investment conference that cross-border business stemming from China remains important but operating within the country is difficult.
"The simple fact is no global Internet company has had any success in China … and I don't see that changing in the short term," Donahoe said, adding that the Chinese government "would prefer local companies winning domestic payments and commerce."
