BANKING
A Banking Blueprint for China
October 10, 2007
AFP Writers

New AFP white paper is a guide through country's banking and cash management regulations.

China's corporate banking system can be a thicket of confusing regulations for foreigners. Special rules apply to different classifications of operations-WFOEs, JVs and rep offices-and specific approvals and restrictions determine the kind and number of accounts each can have, and special arrangements need to be worked out just to repatriate cash.

AFP is now offering a guide to the rules and restrictions that govern corporate accounts. A white paper, "Opening and Operating a Corporate Bank Account in China" is available now through ChinaForum.com.

The document breaks down the intricacies of legal structures available for foreign companies, the types and designated functions of bank accounts, and the authorizations and documents required for opening accounts.

Viewed from the outside, the process of opening and maintaining accounts can seem daunting:

• Three kinds of companies can legally register in China: wholly foreign-owned enterprises (WFOEs), joint ventures (JVs) and representative offices. Companies can also choose designations such as holding company, regional headquarters, finance company, and trading company.
• The structure of the company determines the types of accounts it can open, and the types of accounts are designated for specific purposes and currencies. RMB (renminbi) corporate accounts include basic, regular, special and temporary accounts. Foreign currency accounts include capital, basic, loan and loan repayment accounts.
• Required documents can include an approval certificate, a legal person business license, a certificate of legal personal code and organization, a joint venture contract/agreement, a foreign-invested enterprise foreign currency account opening approval document and a foreign exchange registration certificate as well as company seals and signature chops.
• Authorities issuing documents and approvals include the Ministry of Foreign Trade and Economic Cooperation, the State Administration for Industry and Commerce, the State Bureau of Quality and Technical Supervision, the State Administration for Foreign Exchange as well as provincial and municipal authorities.

The white paper also provides some guidance for understanding the rules of operating accounts, including interest calculations and currency conversions, both of which are subject to partial government control.

Another major concern of foreign companies in China is the question of how to move money out of the country and reduce trapped cash, a process that is under strict control of the State Administration for Foreign Exchange (SAFE). The white paper explains how to do this in the form of dividend payouts or through "leading and lagging strategies" specialized instruments such as cross-border entrustment loans, related-party transactions or certain foreign wealth-management products.

Though China has been reforming some of its banking regulations, the banking and cash management regulatory environment can still be confusing for newcomers. However, AFP can ensure that companies will not have to go in without a map.

"Opening and Operating a Corporate Bank Account in China" is available at www.ChinaForum.com/.

Copyright © ChinaForum 2007