It should come as no surprise for international businesses that derive a significant percentage of their turnover from Chinese consumers that receiving payments from their Chinese counterparties can be a long and cumbersome process. This is especially relevant for overseas companies that do not have a permanent establishment in China in the form of a foreign direct investment such as a limited liability company or a joint venture.
The reason why overseas transactions can be complicated to execute for many businesses present in China is due to the fact that China implements strict foreign exchange regulations, essentially controlling the inflow and outflow of foreign currency. The State Administration of Foreign Exchange (SAFE) is the responsible regulatory body for managing the foreign exchange activities and setting regulations in place. Every cross-border transaction (inbound/outbound) would require an approval which is set in place and is administered by the SAFE.
Therefore, for the convenience of both Chinese consumers and overseas sellers, certain banks in China offer a special type of bank account available to be opened by non-resident legal entities only. This type of bank account is known as a non-resident bank account or NRA, and it can be opened in one of the People’s Republic of China’s (PRC) banks.
A non-resident corporate bank account in China can be set up for companies legally incorporated and registered overseas, outside the jurisdiction of the PRC. Such companies must be operational and have no history of bad records.
The key features of the NRA include:
- The NRA provides account services for overseas companies at PRC domestic branches.
- The NRA can handle settlements via a Renminbi (RMB) NRA account.
- An overseas company thus allows its customers to avoid the exchange rate risk efficiently and guarantees the receipt of funds.
- Simplified procedure of settlement and increased efficiency compared to an overseas transfer.
To open an NRA, the procedures are generally as follows:
- The PRC bank shall first initiate a due diligence process on the company applying for an NRA to ensure no bad records or legal irregularities exist.
- Following the due diligence process, if there are no further inquiries or questions, the PRC bank shall assign a special banking code to the overseas company.
- The applicant shall submit necessary documents for account opening at the PRC bank branch.
- An application is approved, and the NRA is opened. The applicant shall also receive full access to online-banking.
Finally, a number of banks in China that offer NRA accounts solutions on their website would normally set forward very strict requirements and barriers to entry. Such requirements may vary not only from bank to bank but even from a branch to branch of the same banking institution. Thus, it is important to ensure that when deciding to open an NRA account in China, the necessary amount of due diligence has been put into carefully selecting the financial institution that would offer the most sought-after solution/s.
For overseas companies with long-term business ties in the Chinese marketplace but without a direct presence in the country, the opening of a non-resident corporate bank account could be beneficial, as it would bring in an additional sense of security and peace of mind to their Chinese customers and at the same time would allow for a speedy collection of payments compared to the traditional overseas transfer. When it comes to selecting a bank with which to open an NRA account and initiating the opening procedure, it is useful to appoint professional legal and financial teams to handle the entire procedure.
D’Andrea & Partners Legal Counsel and PHC Advisory Tax & Accounting (companies of DP Group) offer full-scale legal compliance, tax advisory support and consultancy to businesses willing to open an NRA account in China. If you have any inquiries or want to know more, feel free to contact us at firstname.lastname@example.org.