Introduction
Since China’s accession to the World Trade Organisation in 2001, the country’s banking industry has become increasingly sophisticated and open. As a result of China’s evolving banking landscape, multinational companies have found it easier to set up efficient bank relationships in the country and China has become a popular international business location. Large corporates are establishing regional headquarters and treasury centres on the China mainland, as opposed to offshore locations that were previously deemed more business-friendly. This has brought with it an increased awareness of treasury practices and a demand for better banking and cash management services.
In this Best Practice Handbook we provide an overview of the intricacies of the banking and cash management landscape in China. In Section 1, we look at the role of the People’s Bank of China as the country’s central bank and discuss recent developments and milestones in China’s banking and capital markets.
China’s clearing and payment systems have evolved alongside the banking infrastructure. In Section 2 of this Handbook, we look at the domestic and foreign currency clearing systems available in China as well as the popularity of certain payment instruments, including innovations such as e-money.
Section 3 provides an overview of bank account types and structures in China, as well as an overview of the documentation required for account opening.
The goals of cash management are the same for any treasurer, no matter where their operating location may be. However the tools that they are permitted to use may be very different. In Section 4, we look at choosing between banking partners in the cash management space in China, as well as the types of services on offer and permissible cash management structures, including entrustment loans.
While significant steps have been made in opening up the China market for international business, there are still many local laws and regulations which are very different from those seen in Europe and the US for instance, particularly surrounding currency and the repatriation of profits. We look at some of the main tax and legal considerations when setting up treasury operations in China in Section 5 of this Handbook and Section 6 provides a treasurer’s checklist to cash
management in China.