If you’re an international business that relies on Chinese consumers for a significant portion of your revenue, you may have experienced firsthand how difficult it can be to receive payments from Chinese counterparts. This is especially true for companies without a permanent establishment in China, such as a foreign direct investment like a limited liability company or joint venture.
The reason for this difficulty is that China has strict foreign exchange regulations that control the inflow and outflow of foreign currency. The State Administration of Foreign Exchange (SAFE) is the regulatory body responsible for managing foreign exchange activities and setting regulations. Every cross-border transaction (inbound or outbound) requires approval from the SAFE.
To make things easier for both Chinese consumers and overseas sellers, some banks in China offer a special bank account called a non-resident bank account (NRA) that can only be opened by non-resident legal entities. This type of account can be opened at any bank in the People’s Republic of China (PRC).
The NRA is designed for companies legally incorporated and registered overseas, outside of the PRC’s jurisdiction. To qualify, companies must be operational and have no history of bad records. Some key features of the NRA include:
- Account services for overseas companies at PRC domestic branches
- Settlement via a Renminbi (RMB) NRA account, allowing overseas companies to avoid exchange rate risk and guarantee the receipt of funds
- Simplified settlement procedures and increased efficiency compared to overseas transfers
To open an NRA, the process generally involves the following steps:
- The PRC bank conducts a due diligence process to ensure that the company applying for an NRA has no bad records or legal irregularities.
- If the due diligence process is successful, the PRC bank assigns a special banking code to the overseas company.
- The applicant submits the necessary documents for account opening at the PRC bank branch.
- If the application is approved, the NRA is opened and the applicant gains full access to online banking.
It’s important to note that different banks and even different branches of the same bank may have very strict requirements and barriers to entry for NRA accounts. Therefore, it’s essential to do your due diligence when selecting the financial institution that will offer the best solutions for your needs.
For overseas companies with long-term business ties in China but no direct presence in the country, opening a non-resident corporate bank account can bring added security and peace of mind for Chinese customers, as well as faster payment collection compared to traditional overseas transfers.