Structure
The Chinese banking system counts on a central bank (People’s Bank of China) that till 2007 supervised the whole Chinese banking system as well as the so called “big 4”, referring to the four most important Chinese banks, for each domain such as:
- Bank of China (for monetary transactions);
- Agricultural Bank of China (for rural credits);
- China Construction Bank (for infrastructure);
- Industrial and Commercial Bank of China (for trade and industry).
Definitely through the years, many other banks developed and the smaller ones established tighter links with the structure and reality of local territories.
Thanks to the reforms, also foreign banks have the possibility to open ROs and branches in Chinese territory, and even invest in Chinese banks.
Chinese Banks unfolding in EU
Recently, we are experiencing the unfolding of Chinese banks branches all around Europe. Chronologically, the last one to open a branch in Europe was China Construction Bank, which opened its branch in Milan in July 2015. The approach of supporting Chinese companies in their go-global strategy, both from a financial point of view as well as assisting in mergers and acquisitions (M&A) or closing deals with local territory, is now striving to create services for European customers (corporate or private).
It may be interesting to check with the local branch of one of the Chinese banks currently operating outside China and ask for the support they may offer to EU companies.
My company’s bank accounts
If you set up a company in China, you will have to provide a Chinese bank account. Chinese banks can open accounts both in RMB and in foreign currency. Anyway, there are many different types of accounts, both in RMB or foreign currency but the most common ones are:
- Basic account (in RMB): it is generally used for operations such as transfer of funds (salary payments, deposits, etc.);
- General account (in RMB): it is generally used for deposits and operations like repay loans
- Special accounts: it is generally used for extraordinary operations such as injection of capitals.
As a company, you will have also Capital Accounts (in foreign currency) to hold the capitals of the Company and it comes generally from the foreign investors as well as Currency Accounts (in foreign currency) to hold the foreign currency for daily operations of the company.
Of Course, you will be requested to provide many documents as a Certificate of Approval issued by Chinese authorities (i.e. Ministry of Commerce), business license, Enterprise Code Certificate, State and local tax registration certificate.
Be prepared that depending on the kind of company (and bank guidelines), there may be some variation in the types and numbers of documents requested.
Private accounts
Traditionally, the Chinese are not keen on paying for everyday purchases with credit/debit cards, but they generally prefer cash. On the other hand, they are really used to buy online with pre-paid cards for internet transactions.
As a foreigner you may withdraw cash from ATMs, but double check the fees, as they can vary drastically.
If you are going to really in China for good, you can easily open a bank account in a Chinese bank by showing your passport and paying a deposit. Of course, the account is very useful for some specific purposes such as payment for utilities or rent of an apartment. Check the withdrawal fees which may vary from one bank to another.
Top tip: if you travel a lot within China, it will be better to open a private account in a bigger bank, in order to be able to exploit their national network and find ATMs all around China.
Moreover, if you are used to exploit online services, check the webpage of the bank you intended to choose since online services may be limited in the English version of the bank webpage.
Last but not least, you can even get a Chinese credit card but need to prove that you have a steady income and have a residence permit. Of course, each bank has its own practices and needs to be double-checked.
Bibliography
Junie T. Tong, “Finance and society in 21st century China: Chinese culture versus Western markets” - Farnham ; Burlington, Vt.: Gower, 2011
Gene Marvin Tidrick, “China: an evaluation of World Bank assistance”, Washington, D.C. :, London: World Bank, Eurospan, 2005