Domestic Money Transfer Services for Migrant Workers in China

Publication Date: Oct 2005
Published by: Consultative Group to Assist the Poor (CGAP)
Document Type: Paper (Microsoft Word)

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How can the domestic remittance market in China be improved?

This study aims to understand the demand for and supply of the remittance services for migrant workers in China and recommends areas for improvement

The paper presents key findings in the following areas:

• Market size:
  • Huge and growing;
  • Large surplus of labor in rural China to be shifted out of agriculture.
• Market demand for domestic remittance services:
  • Low literacy levels among migrant workers leading to a lack of understanding of remittance products;
  • Small amounts remitted per transaction;
  • Demand determined by the total real costs of remittance.
• Supply of domestic remittance services:
  • 75% of the market is captured by formal service providers, mainly China Post, the commercial banks and rural credit cooperatives;
  • Quality of service is poor;
  • The remaining 25% is carried home or sent through other channels;
  • Informal service providers focus on international remittances;
  • The informal operation of domestic remittances is under-developed;
  • Of all the remittance products available, remitting through a card-based system is the fastest and cheapest.
• International remittances:
  • Consistent increase in volume;
  • Major players are the Bank of China, commercial banks and China Post;
  • Remittances originate from USA, Japan and the European Union (EU).

The paper recommends that:

• Consumers should be educated about existing remittance services;
• Competition would encourage improvement in the quality of remittance services;
• China Post should improve its services.