China's central bank has just approved an application submitted by Mastercard's Chinese joint venture to establish a bank card clearing business. The approval is a huge milestone for the company, which had spent decades trying to enter the country's lucrative payments and clearing market.

The joint venture, which was established in March 2019 by both Mastercard and Netsunion Clearing Corporation, plans to form a new entity to focus primarily on providing bankcard clearing services. The People's Bank of China (PBOC) formally announced its approval of the new business on Tuesday. Netsunion is directly affiliated with the PBOC.

Netsunion, which was originally established in 2017 by the central bank is the central platform used by all of China's third-party payment service providers. The company's service essentially cuts through the clearing process between banks and service providers such as WeChat Pay and Alipay, while also giving the central bank access to relevant data for all mobile transactions done within the country.

Following the announcement, Mastercard mentioned in its own statement that it should be able to begin domestic bank card clearing activities within the year. The approval for the new clearing business comes as China and the United States ease trade tensions, particularly after the sign of the phase one trade deal between two of the world's largest economies.

As part of the deal, China had agreed to further open up its domestic financial markets to US companies such as Mastercard. The PBOC mentioned in its statement that its approval for the JV's new business is a reflection of its commitment to open up the country's financial the sector to US players.

The PBOC added that the next steps in further opening up the country's financial markets are to provide other bank card applications a more open, just, and fair opportunity to enter China, while also bolstering its supervision to maintain financial stability in the country.

Allowing a partially foreign-owned entity to operate a clearing business in China is a big step for the country as it has long insisted on controlling key financial services, including its online payment market and clearing services. The US and other nations have persisted in convincing China to allow foreign players wider access to its markets.

Mastercard first entered the Chinese market in 1998, during a time when bank cards were very uncommon. China then eventually established China Unionpay, which became a domestic alternative to Visa and Mastercard. In 2012, the US launched a complaint against China with the World Trade Organization for its discrimination against foreign bank card firms.