China UnionPay has long used its monopoly to block Visa in the Chinese Mainland. Now Visa has started to block UnionPay internationally. As reported by the Wall Street Journal and without much notice, the fight between international and state capitalism has just gone global.

UnionPay is pure Chinese state capitalism. Visa is pure American international capitalism. And they’re both now fighting for global dominance in credit cards.

In Mainland China, UnionPay has a credit and debit card monopoly in the world’s 2nd largest economy. Since its founding in 2002, it has already issued over 1 billion cards and in 2009 it processed over $1 trillion in transactions. Its advantages within China are clear: a monopoly, captive customers, high cash flow, and deep pockets.

In contrast, Visa International has successfully competed against MasterCard and American Express for a generation. It has grown by ability, not by political support, to become the world’s largest credit card company. In 2009, Visa processed over $4.4 trillion in transactions. These two dominant but fundamentally different companies are now going head-to-head in more and more places.

For the past 20 years, competition between international and state capitalism has only occurred within countries like China and Russia. In the last two years, Chinese companies in particular have started to go global. Outbound Chinese M&A surged to $50B and $43B in 2008 and 2009 respectively. The 2008 outbound M&A alone was more than the previous 8 years combined.

This likely forshadows many similar situations.  Locally dominant Chinese companies are going global and the competition is shifting to a different landscape.