By Alistair Barr
SAN FRANCISCO, June 17 (Reuters) - Ebay Inc will become the first foreign company to secure a financial payments license in China, CEO John Donahoe predicted, but the retailer is refraining from competing in the more aggressive and local-dominated retail sales sector.
Donahoe sees 'encouraging signs' from the Chinese authorities, but said it remained next-to-impossible to guess when its fast-growing PayPal unit will finally get the green light to operate in the world's second largest economy, he told the Reuters Global Technology Summit on Monday. (For a video of the interview, click on http://reut.rs/11FgUSQ)
'I am confident that PayPal will be the first non-domestic company to get a payments license in China. That could be in three months or five years,' said Donahoe.
It is not clear whether PayPal will have to do this through a joint venture with a domestic company in which it owns a minority, 49 percent stake, or whether it will be able to own a majority stake, Donahoe added.
Foreign Internet corporations traditionally operate at a disadvantage versus locals such as Alibaba and Baidu Inc in the country, which formally opened to international business just over a decade ago when it joined the World Trade Organization. The financial and retail industries remain largely dominated by domestic companies such as Bank of China and Alibaba.
'The evidence would suggest that a non-Chinese company is at a disadvantage. We have chosen not to compete aggressively,' he said at the summit, held at the Reuters office in San Francisco.
But 'over time you'll see the Chinese domestic economy try to connect with the global one.'
Ebay does around $6 billion of business volume in China currently, much of it Chinese companies selling to the rest of the world as homegrown businesses test global markets. Donahoe expects growth there to continue to outpace the rest of the world.
Donahoe said eBay was working closely with foreign governments to combat online fraud and crime, especially money-laundering. About a quarter of PayPal transactions are cross-border. While eBay has not experienced state-sponsored attacks itself, it has noticed a marked increase in such cyber attacks, generally, in the past 12-to-24 months, he added.
On the recent debate about the extent to which the U.S. government conducts surveillance within its own borders, Donahoe said eBay has never been asked to participate in a broad information-gathering exercise. But he said it does comply with legitimate requests for data on a case-by-case basis.
Donahoe personally welcomed the debate that has arisen since news first broke that the National Security Agency is gathering information from a broad swathe of other Internet companies through the Prism program.
'It's appropriate for us, to have a bit of a national dialogue and debate on privacy and on cyber security. And just so that what sometimes goes unspoken gets spoken,' he said.
'We're trying to make sure that all of our privacy policies and how we comply stand up to the spotlight. As the digital world becomes more of our everyday lives, there will be more opportunity and need for more of a dialogue.'
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(Additional reporting and writing by Edwin Chan; Editing by Edward Tobin and Andre Grenon)
Keywords: TECH SUMMIT/EBAY
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