JD: PayPal will get China payments licence

John Donahoe$6,000,000,000.00 is traded out of China on eBay each year. That’s Chinese merchants selling to the rest of the world on eBay. It’s mostly one way traffic however as eBay are still biding their time and, according to John Donahoe, waiting for the Chinese to connect their economy and Internet to the rest of the world.

There is a little bit of importing into China, but in the main it’s passive commerce – enabling Chinese buyers to purchase from the rest of the world rather than actively targeting the market with domestic Chinese to Chinese sales or cross border sales targeted at Chinese consumers.

In an interview with Reuters, John Donahoe explained that eBay are biding their time until the Chinese are ready and if and when that time comes eBay will be looking for opportunities and possibly working together in partnerships with Chinese companies. He said quite simply that “The evidence would suggest that a non Chinese Internet company is at a disadvantage so we have chosen not to aggressively compete in that”.

When asked about PayPal he was even more blunt explaining that eBay can’t compete in China on payments until they get a payments licence. He is sure that one day this will come saying “I am confident that PayPal will be the first non-domestic company to get a payments license in China”, however he qualified this adding “That could be in three months or five years”.

PayPal are he says in dialogue with the Chinese Government and believe they are doing everything they need to comply. Currently John Donahoe says that he believes PayPal are being given “encouraging signals” and that you have to think long term when dealing with China. He thinks there’s more openness with Chinese authorities and that over time the Chinese economy will benefit from connections outside of China and that eBay and PayPal can contribute to growth.

A lot of what’s driven the Chinese economy has been business to business but business to consumer Internet trade can offer opportunities to drive that growth. However when asked if it was protectionism by the Chinese to restrict overseas competition for Chinese companies John Donahoe refused to be drawn saying that he couldn’t speculate. However he did say that when the time horizon was right PayPal are ready to move and that ongoing talks with the Chinese regulators are encouraging.

What would eBay and PayPal in China mean for us? Well quite frankly it’s a 1.3 billion population and Chinese Internet users grew 10% last year with some 560 million now online. That’s an attractive number of potential customers who are likely to snap up western goods, many of whom have money to spend. Wages are rising in China, even to the extent that some manufactures are likely to bring production back to the West but it does mean many Chinese consumers have money to spend.

Will John Donahoe be right and PayPal be the first non-Chinese company to get a payments licence? Only time will tell and currently although he’s optimistic there’s no sign that it’ll be any time soon.

You can watch the full interview on the Reuters website, or just the segment where John Donahoe discusses China.