Choosing the right type of account must be based on your subsidiary’s specific transaction needs, and is essential to success in this burgeoning market.

Once a foreign company completes the registration process for setting up a subsidiary, and then obtains the required business license, it is then permitted to open a bank account at local banks in mainland China.

This article provides basic information regarding the most commonly used onshore bank accounts by U.S. companies:

  • RMB basic deposit account (人民币基本户)
  • RMB general deposit account (人民币结算户)
  • RMB/USD capital account (人民币/美元资本金户)
  • USD settlement account (美元一般结算户)

PNC can provide you with experienced insights and connect you with the local banks to help make your experience as efficient as possible.

RMB Basic Deposit Account (Basic Account)

  • This account is designed for cash collection and payments, cash withdrawal, daily fund transfers, and salary distribution. It also can be used for tax payments. In accordance with the rules of the People’s Bank of China (PBOC), one company can establish only one basic account with a single bank.
  • In accordance with the rules of the People’s Bank of China (PBOC), one company can establish only one basic account with a single bank.
  • The basic account must be opened first, before other accounts, including a capital account, can be opened.
  • The RMB basic account is the only account that can be used for salary payment and cash withdrawal.
  • In the past, banks first needed to report basic information to the PBOC for account opening, at which point the PBOC would issue the account opening permit license. At the end of 2019, PBOC revised its policy to cancel the issuance of account opening permit licenses. According to the new policy, account opening approval from the PBOC is no longer required, and banks can file the account opening in the PBOC local account management system instead.
  • Companies that already have an account opening permit license should return the license to the bank when applying for a change of the company name, legal representative and/or the person in charge of the company bank account.
  • After the company submits all the required documents, it will take 2–3 weeks to complete the procedure and for the account to be fully functional.

A challenge for many small and medium-sized companies is that they may not have a designated relationship manager at the bank to support their daily business.

Application

To open an RMB basic account, the following documents are required:

1. Business license

2. Original ID card/passport of legal representative

  • Banks need to verify the legal representative’s original ID card/passport. However, since many foreign companies’ legal representatives may be based overseas at their parent company, it can be difficult to fly to China and submit their passport just for account opening. In the past, some banks accepted alternative options to conduct verification:
    • The legal representative could send the passport via courier to his/her authorized person, who then submitted the passport to the bank for verification.
    • Some banks accepted passport and signature to be notarized by Chinese embassy located overseas.
    • Some banks provided services such that the legal representative could go to their branches overseas to conduct original ID card/passport verification. After verification, their overseas branches would send back the result via email.
    • Very few banks accepted identity verification via video.

However, in 2020, as China’s government enhanced mitigation against risk in the financial system, regulators took strict measures to crack down on financial fraud. Thus, the customer due diligence process is much more stringent, and banks generally do not accept alternative options for the legal representative’s identity verification. Today, the procedure is:

    • Most banks will require the legal representative to appear at the bank counter with his/her ID card/ passport, verify his/her intention to open an account, and ask other KYC questions. The bank will use audio and video recording during this procedure.
    • If the legal representative is located overseas, face-to-face verification is still required, and the bank will ask its overseas branch to perform the identity verification. However, few Chinese banks provide this service.
  • If a company wishes to close its basic account, or move its account from one bank to another, the original ID card/passport is also needed.
    • It will take 1–2 weeks to complete the procedure.

3. Third-party authorization

  • If a company outsources the account opening process to a third party (e.g., an accounting or law firm), it must issue an authorization letter to the third-party employee who handles the account opening. The employee must submit his/her ID card/passport and authorization letter (with the company’s official seal, and the legal representative’s signature and seal) to the bank. If the legal representative handles the opening by himself/herself, the authorization letter is not needed.

4. Original ID card/passport and contact information of the authorized representative in the company for verification of high-value payments (大额交易联系人)

  • When a company conducts high-value payments at the bank counter, the bank processing the transaction must call the authorized contact for confirmation.
    • The entity must have at least two authorized contacts who are based in China.
    • The contact number must be a domestic phone number only; a China cellphone number is acceptable.

Each bank has its own definition of high-value transaction. For example, some banks define an amount larger than RMB8 million as high-value.

5. Official seal, financial seal and signature/seal of the authorized person

6. Approval certificate for a foreign-invested company

7. Approval certificate of import and export (for the company that has the license for import and export)

8. Other documents/procedures as required by the specific bank branch

Both original and copies (with company seal) of the documentation should be submitted.

RMB General Deposit Account (General Account)

A general deposit account is used for fund flows resulting from deposits, payments/receivables, borrowing proceeds, debt repayment and other settlements. While the account may be used to deposit cash, it is prohibited from being used to withdraw cash and distribute salary.

There is no restriction on the number of general accounts that can be opened. Therefore, a company can open multiple general accounts — whether at the same bank or several banks — for different purposes. However, the branch/sub-branch where the general accounts are opened must be different from where the company’s basic account is opened.

Banks must file account opening–related information with the PBOC, though PBOC approval is not required. It takes approximately 1 week for banks to complete the account opening procedure and to make the account fully functional.

Application

To open an RMB general account, a company would submit the same materials as required for an RMB basic account.

In 2020, regulators took strict measures to crack down on financial fraud. Thus, the customer due diligence process is much more stringent.

RMB/USD Capital Account (Capital Account)

A capital account is used to receive capital injections from foreign investors (such as the China entity’s parent company), as well as payments under current items and capital items approved by the State Administration of Foreign Exchange (SAFE).

Application

To open a USD capital account, the company must obtain a Filing Receipt (外汇管理局备案回执) from SAFE in addition to the documents required to open an RMB basic account.

For an RMB capital account, the company should have a special seal with “XXX Co., Ltd RMB Capital Account Special Seal” (XXX公司人民币资本金账户专用章). Some banks may also check the intention of opening an RMB capital account with the legal representative, and may require the contact information of the authorized person for confirmation of high-value transactions.

It will take approximately 3–5 working days for the bank to complete the account opening procedure and to make the account fully functional.

Regulations on the Usage of the Capital Account

If a company’s registered capital is in a foreign currency (such as USD), the company can convert the foreign exchange capital into RMB on the basis of the company’s actual business need. The proportion of the conversion is 100%, subject to adjustment by the banking regulator. The converted RMB will be credited to a corresponding account under capital account “RMB converted pending for payment” (结汇待支付账户).

For funding usage in the capital account, there are three ways to effect payment:

  • From the USD capital account to the beneficiary’s account: The company provides supporting documents to its bank for verification. The bank then converts USD into RMB and pays the beneficiary directly.
  • For funds that have already been 100% converted and credited to the account “RMB converted pending for payment”: The company provides the supporting documents to the bank for verification. The bank then pays RMB to the beneficiary.
  • From a capital account to an RMB basic or general account for petty cash: A company can pay up to $200,000 per month or RMB equivalent by petty cash.
    • The petty cash can be used only for payment of minor general expenses, such as meals, transportation and travel.
    • Other payments, such as rental fees, salaries and payments to vendors, must be paid through the capital account to the beneficiary account directly.
    • The bank will verify the authenticity of the supporting documents for each payment.
    • Some banks allow companies to convert $100,000 one-time only without requiring supporting documents. However, when the company exhausts the converted $100,000 and wants to convert the next $100,000, the bank may require supporting documents for the initial $100,000 before converting the next $100,000. The maximum amount of each conversion may differ between banks.

USD Account (Settlement Account)

A company can open a USD account at the same branch or sub-branch as its RMB basic account. Cash withdrawals can be made through this account; however, the usage of the withdrawal is limited (e.g., for overseas travel expenses). The company must submit relevant supporting documents.

Application

In addition to the items numbered 1, 2, 3, 4 and 7 in the RMB basic account application, the following items are required to open a USD settlement account:

  1. A filing receipt issued by SAFE
  2. Approval certificate of foreign exchange transaction when filing for a foreign trade company (外贸企业备案表), freight company (货运企业备案表) and/or shipping company (航运企业备案表)
  3. Other documents/procedures that may be required by the specific bank branch

All original and copies (with a company seal) of the documentations should be submitted.

It will take approximately 3–5 working days for the bank to complete the account opening procedure and to make the account fully functional.

Accounts for Companies Without a Subsidiary in Mainland China

If a foreign company registered outside of mainland China (including Hong Kong, Taiwan and Macau) does not register a legal entity in mainland China, but wishes to open an account there, a variety of offshore accounts for business may be available, including OSA (offshore accounts), NRA (nonresident accounts) and FTN (free-trade non-resident accounts). These three types of accounts will be addressed in a future article.

Considerations When Opening an Account

  1. For all types of accounts, specific requirements can differ between banks, as each has its own policies for KYC. If a company wishes to open an account at a local bank, the company should first contact its relationship manager, who will conduct an on-site inspection. Some banks will do on-site verification for every account regardless of account type. The relationship manager’s verification includes, but is not limited to, ascertaining that the actual business operation site matches the registered address on the business license. If not, the relationship manager will check the office lease contract and the water and electricity utility bills for verification. After verification, the company can make an appointment at the bank counter to submit the required documentation and begin the account opening procedure.
  2. In addition to the above-mentioned types of accounts, special deposit accounts and temporary deposit accounts that must be approved by the PBOC for opening are also available. However, these accounts are not frequently used.
  3. A challenge for many companies — especially small and medium-sized companies — is that they may not have a designated relationship manager at the bank to support their daily business. PNC can help with any additional questions you may have regarding China local bank accounts.

Ready to Help

If you need assistance with an account opening in China, or if you’re interested in learning about other types of accounts mentioned here, please contact your International Advisor or PNC Shanghai Representative Office. PNC can provide you with experienced insights and connect you with the local banks to help make your experience as efficient as possible.