Opening a Bank Account in China

By Dezan Shira & Associates

British payment systems firm VocaLink has formed a five-year deal with China’s UnionPay, the only domestic bank card issuing company in China and one of the biggest card issuers in the world. With more than 5.4 billion UnionPay bank cards in circulation, the deal should improve Chinese bank account holders’ international connectivity, granting access to Europe’s ATM network.

As China’s banking system continues to liberalize, foreign investors have more flexibility over the management of funds. However, China’s banking system remains complex, and many restrictions apply to foreign investors. There are several options foreign investors need to consider when opening a Chinese bank account.

Account Types

Foreign-invested entities (FIEs) in China need to establish at least two bank accounts: an RMB basic account and a foreign currency capital contribution account.

• RMB Basic Account: An FIE must have one (and only one) RMB basic account for daily business operations in China. This account is the only account from which the company can withdraw RMB cash. The RMB basic account often acts as a designated account for tax payments.
• Foreign Currency Capital Contribution Account: An FIE must have, and obtain approval from the State Administration of Foreign Exchange (SAFE), a foreign currency capital contribution account to receive capital injections from foreign investors.

Additional general RMB accounts and other types of foreign currency accounts can be opened for different purposes. For foreign currency accounts, these may include a settlement account for the collection of current items in a foreign currency, foreign debt special accounts, and temporary capital accounts.

International and Chinese Banks

Foreign investors can establish accounts in China with international banks with a local presence, the major banks being Bank of East Asia, Citibank, DBS Bank, Hang Seng Bank, HSBC, and Standard Chartered; or through a Chinese bank, the largest are Industrial and Commercial Bank of China, Bank of China, China Construction Bank, Agricultural Bank of China, and Bank of Communications.

Foreign investors in China often prefer to establish an account with an international bank because of an existing business relationship. However, establishing accounts with a Chinese bank has a number of advantages, including:

• The application process for opening a bank account with an international bank in China will be more document-intensive and take longer compared to opening such an account at a Chinese bank;
• There are substantially more Chinese commercial banks than foreign bank branches, which allows for more convenient and faster RMB remittance; and
• Most Chinese companies have local bank accounts. Conducting transactions with them will be easier and faster if done from a Chinese bank instead of an international bank.

When opening a bank account in China, an FIE will need to specify the company’s “signature.” Usually the company’s financial chop (seal) is required to do so, along with either the legal representative’s chop (or chief representative’s chop for a representative office) and a handwritten signature. Banks generally prefer using the legal representative’s chop instead of a handwritten signature, as the latter is easier to forge and harder to verify.

Many bank transactions can now be completed online in English, including the approval of transactions and viewing account balances from abroad. It is possible and sometimes necessary to make tax payments online in certain areas (including Beijing) by signing a three-party agreement with an authorized Chinese bank.

For an entity’s RMB basic account, it is possible to apply for different levels of e-banking access and multiple security keys (in the form of a key-ring/USB dongle) – one with access rights and another with approval rights. Another common security measure is a device that generates a new password for every check that is written.

About the author: This article originally appeared in China Briefing, a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email [email protected] or visit www.dezshira.com.