How to maximize banking services for your China business - Part 2

To maximize your corporate banking in China, you should familiarize

yourself with the services offered by the institution your work with and

not be afraid to ask as many questions as necessary. The more you

know about your needs, the better you will be able to utilize your bank’s

services to run your business successfully.

There are three different types of payment options available to companies to do domestic payments in China. The most common way is to utilize your bank’s platform for online banking. When banking with a Chinese institution, you can start by finding out if your bank has an English version of its platform, and what capabilities are available to you to access it and approve payments.

Most banks in China will offer you an online solution and will provide you with E-tokens, one for the so-called cashier and one for the authorizer in China. The beneficiary's name on any online banking transfer must be written in Chinese characters, which means that if you don't write in Chinese characters, you will need to use the services of someone in your office or an outsourced provider to do it for you, and after that authorize the payment.

Online banking in China is relatively straightforward. The biggest difficulty for any English speaker is to set up the system, since most of the Chinese platforms still use the old Internet Explorer version in order to upload the software. However, once the system is working in your computer, everything else is rather simple.

The second method of payment is branch banking, which refers to physically going to the bank. This instance is used when declaring any entry of money that comes into the capital account, transferring funds from the capital account into the RMB basic account, and any overseas transfers. Whether it is funds going into the account or funds going out of the account, all must be done through branch banking. This cannot be done through online banking. This is also the case for the issue of bank drafts or commercial drafts.

Because so much of the banking in China is done in person, working with a branch within walking distance is ideal. Chances are, especially at the beginning, that you may have to return to your branch several times until you gather all the correct documentation to execute the necessary transactions.

The third one is called direct connectivity. This may not apply to small or medium size companies, but as your business grows and you have a high volume of payments, the bank will give you the technical ability to connect to the system through direct connectivity to make payments much easier and smoother, but you need first to get to a certain size and volume of transactions.

Some of the biggest banking obstacles can present themselves in relation to cross-border payments. Transactions such as sending a payment to an overseas supplier, repatriation dividends or any other service agreement involving funds going in and out of the country, must be done manually at the bank and supporting documents must be presented.

In terms of what documents are needed, the list differs depending on the nature and value of each incoming and outgoing overseas transaction. It’s crucial to maintain a clear communication’s exchange with the bank’s manager to make sure you receive the correct document list.

There are two entities in China responsible for foreign exchange controls, the People's Bank of China and the State and Administration of Foreign Exchange, and they get involved in the approval process depending on the value of the transactions. Currently, banks and financial institutions must report all domestic and overseas cash transactions over 50,000 RMB.

It does not mean however that there is an application process, but banks are obligated to report it. An easy solution to simplify things would be to transfer values of less than 50,000 RMB, splitting invoices if necessary. 

If you have a personal account, banks have to report any overseas transfers of U$10,000 or more.  They also must report any other transaction executed in US dollars. Chinese citizens investing large sums of money abroad must also be vetted and approved before doing these transactions. The Chinese government is doing this to identify suspicious operations and prevent money laundering.

It is important to be upfront about your business with your bank in China. If you are registering a company in the country, explain your business scope to the bank and the activities you are going to be doing, as well as your business plan. They don't necessarily want to read the actual business plan, though some international banks may want to see it, but they will rather ask certain questions about your registered capital and the type of activities you will be performing.

Just as the bank may present you with a list of questions, you should to the same with the banks you are considering working with.

First, ask about the RMB and the general account, and the functions of these accounts. What services will you require? Will you need a loan? Do you need bank drafts and commercial drafts? Do you need a checkbook? Find out exactly what documents are needed and the time frames for opening these accounts, and the papers required to do other transactions, such as the release of funds from the capital account.

In general, for the first release of funds from the capital account the original passport of the legal representative is required, which means that if that person is not based in China they will either have to travel to China or they will need to courier their passport. In some banks, the original passport is required for each capital injection of funds. You can choose a branch that doesn’t request this every single time.

Another important question is if the bank’s online system has its English and Chinese versions synchronized. If the cashier inputs information into the Chinese version and you authorize from the English version, both should be synchronized for your convenience. It’s important as well to know if you can receive email, SMS or WeChat reports regarding incoming and outgoing funds.

Most banks can offer notifications, but only to Chinese mobile numbers. You will need one, unless you decide that one of your employees can get these notifications.

You must take into consideration who will be the bank signatories, responsible for the physical operation of the accounts. If the signatories are not based in China, you will find yourself sending documents all over the world to be signed, especially to do cross-border transactions.

Once you set up your company, you will receive a finance chop. The finance chop is used for opening a bank account, issuing checks, authenticating financial documents, such as tax filings and compliance documents, and for most bank related transactions. It is a mandatory chop. Companies will often keep their finance and company chops separate to avoid exposure to misuse.

Inquiring about your bank relationship manager is also relevant. These managers tend to change frequently, which may be frustrating. However, you can follow your relationship manager to a different branch. The language limitations can be disappointing as well, but that is changing since there are more bank professionals who speak English.

Most international and Chinese banks have English speaking managers, but it is more complicated to find one in sub-branches.

One last important aspect about banking is granting others access to your bank accounts. If you are utilizing an outsourced provider, such as an accounting firm to help you with your financial accounts, they may offer you banking services. They will act as the cashier and input the data for the transfers into the system, then no matter where you are, with your E-token as authorizer you can approve the payments.

One of the advantages is that they are protected through their own insurance for liability reasons. They have the capability of downloading bank statements as often as you like. They can go online, look at bank balances and see whether transfers have gone out. They can also provide their mobile numbers to get SMS notifications to alert you about incoming funds.

The downside is that they may be working with several clients and might not be readily available at that moment to give you the information you need. This might not be efficient for you, which is why you could designate someone in-house to act as the cashier and give you the information, whether it be a junior accountant, a receptionist or personal assistant.

Should you have questions about choosing the right bank for your China business, complete the below inquiry form with your questions and comments. 

DISCLAIMER: All information in this article is verified to the best of our ability and is assumed to be correct at time of release; however, Woodburn Accountants & Advisors does not accept responsibility for any losses arising from reliance on the information provided within. The information provided is for general guidance and does not replace specialized advice.


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