China’s banking structure

The financial industry in China is supervised by the People’s Bank of China (PBoC) which is China’s central bank. It is also in charge of formulating and implementing monetary policies and monitoring lending and foreign exchange transactions between banks as well as the national payment and settlement system.

The pillars of the banking system consist of the biggest national banks, including the Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB), Bank of China (BoC), Bank of Communications (BoCom) and Agricultural Bank of China (ABC), which together form a developed financial network in China with extensive geographical reach and assets. There are also several other banks specifically targeting rural areas as well as branches of foreign banks, although with limitations in their business scope and the services they are able to offer.

The State Administration of Foreign Exchange (SAFE) also plays an important role in the management of the Chinese banking system. In brief, its major responsibilities are to regulate and supervise foreign exchanges and monitor cross-border capital flows.

Therefore, through its policies and regulations, the SAFE greatly influences the daily operations of foreign-invested companies in China as well as Chinese companies involved in international business.


Types of bank accounts

A company may open different types of bank accounts suitable for different needs and purposes. For the time being, foreign companies are typically required to open at least two bank accounts, namely a capital account and a CNY basic account, which have the following characteristics:

Capital accounts: These have the purpose of receiving capital injections from shareholders. Their usage should strictly follow SAFE [Hui Zong Fa 2020-89] regulations. For example, a limit of US$200,000 of the injected funds in the capital account may be transferred to the company’s CNY account each month. The funds need to be completely used up before transferring additional capital into the CNY account.

For a newly established company, it may be difficult to obtain a bank loan unless the shareholder has a privileged relationship with the bank and is able to offer a guarantee to cover the financial risk.

Alternatively, it is possible to make direct payments to suppliers without limitations by providing supporting documents such as contracts and official invoices for every payment made from the account. Capital accounts can be in any currency in accordance with the company’s Articles of Association and business license.

CNY basic accounts: These accounts are the main CNY accounts for the company, used to collect payments from Chinese clients and pay Chinese suppliers, rent, taxes, salaries etc. These accounts can also directly receive and process international payments following the relevant SAFE regulations.

In certain Free Trade Zones in Shanghai, such as the Lingang New Area, foreign-invested companies are no longer required to open a capital account if they open a basic bank account that uses CNY as its currency.

Other Accounts: Usually, companies engaged in international trading may find it useful to open a ‘general account’ to receive and make international payments in a foreign currency. This account can also be in CNY, in addition to the CNY basic account.

Moreover, a company can open a foreign exchange settlement account in different currencies to receive funds from overseas clients and temporarily keep them in this account to control the currency exchange risk and avoid the losses incurred by an adverse currency exchange at a particular time. One limitation is that the funds in the foreign settlement account cannot be transferred freely to make payments to other Chinese companies; that can only be done via a CNY basic or general account.

There are also other types of bank account that can be opened for a specific purpose, such as for tax or social contribution deductions.

All the bank accounts described above are used for common business operations, yet they cannot be used for financing purposes, for which companies are required to open a dedicated inter-company loan account or a bank loan account. Inter-company loan accounts are opened on the basis of a loan agreement between a Chinese company and a foreign-related party and are subject to SAFE regulations. The borrowed amount cannot exceed the foreign loan quota, which is equal to the difference between total investment and registered capital, or is proportionally calculated if the registered capital has not been fully paid up.

The usage of a loan account is similar to a capital account, requiring the submission of supporting documents for each payment.

For bank loans, there are no specific limitations besides the commercial terms negotiated and stated in the loan contract. However, for a newly established company, it may be difficult to obtain a bank loan unless the shareholder has a privileged relationship with the bank and is able to offer a guarantee to cover the financial risk.

Lastly, foreign companies are allowed to open bank accounts in China to settle payments in advance, such as by using a pre-expense account, or they can open a non-resident account (NRA) in a free trade zone without the needing to have a legal entity registered in China.


Requirements for opening a bank account

To open a bank account, companies need to submit several documents to the bank, typically including the business license and the original passport of the legal representative along with other documentation depending on the specific bank’s internal requirements. Although there may be different practices and procedures from bank to bank, in general, the requirements are becoming stricter in a common push to prevent fraud, money laundering and any other illegal activity. In particular, for newly established companies looking to open a bank account, the bank may:

  • Require an onsite inspection of the company’s premises. This means that companies need to have an identifiable physical office with a company sign or logo.
  • Ask to see the business’s lease contract, rent invoice and latest utility bills as proof of real business substance.
  • Check the number of companies under the company legal representative’s name.
  • Investigate the direct shareholder(s), the ultimate beneficiary and any politically exposed person (PEP).
  • Request the original ID or passport of the company’s legal representative and, in most cases, their physical presence at the bank.
  • Request a Chinese telephone number to reach the legal representative.
  • Apply a minimum amount for deposits into the bank account.

In many cases, it may be impossible to open a bank account if the legal representative does not reside in China, cannot provide a Chinese telephone number or proof of substance for the business.

Moreover, since June 2020, the People’s Bank of China and the SAFE have been conducting special inspections targeting abnormal accounts in the banking system, which may have a series of impacts on the activities of foreign-invested enterprises and their daily banking operations. For example, banks may freeze accounts if legal representatives fail to answer phone calls from the banks or if accounts have not been used for over six months.

Accounts can also be blocked if companies fail or forget to update their information in a timely manner following a change in management, or if the bank discovers any other indication of company abnormality.


This article was written by Hawksford who have extensive experience in opening different types of bank accounts for clients, and dealing with financial institutions to find the most suitable solutions for our clients’ needs. Read more on their China Guides