Decoding the Company Bank Accounts in China
- May 8, 2024
- Posted by: sinovestconsulting
- Category: Legal & Regulation
Corporate Banking: Insights for Company Accounts in China
China’s banking system is regulated by various authorities, including the People’s Bank of China (PBOC), the China Banking and Insurance Regulatory Commission (CBIRC) and State Administration of Foreign Exchange (SAFE). Foreign-Invested-Enterprises (FIEs) should be aware of the regulatory framework governing banking activities, foreign exchange control, and anti-money laundering measures.
What kind of Bank accounts must have a company legally registered in China
In China, a local company, that is to say, a wholly Chinese owned enterprise is required to have at least one bank account, which is the basic bank account. A Foreign Invested Enterprise (FIE) must have at least two type of bank accounts: one is capital account for depositing the registered capital, and the other one is CNY basic account for day-to-day business operations. The opening of a capital account is not limited to the number of accounts, currency and place of opening. However, opening an account at a place other than the company’s registered city can cause some complications later on and is generally not recommended.
Furthermore, according to the updated “Measures for the Administration of CNY Bank Settlement Accounts (2023)”, company CNY bank settlement accounts are divided into basic accounts, general accounts, special accounts, and temporary deposit accounts according to their purposes. Therefore, for FIE, it can also open general accounts in CNY or in other foreign currency. For foreign currency accounts, these may include a settlement account for the collection of current items in a foreign currency, foreign debt special accounts.
Functions of the main company bank accounts
Basic account in CNY
For daily business operations in China, a company must and can only have one basic account in CNY. This is the company’s only account from which it can withdraw cash and pay salary & bonus for employees. It can receive or pay the payment in CNY, or in foreign exchange for which the bank will make the settlement in CNY into the basic account.
Capital account
After opening the basic bank account, the FIEs need to open the capital account which only can be used for injecting the capital from the shareholder(s). For opening the capital account, the approval must be obtained from the State Administration of Foreign Exchange (SAFE), which is call the Foreign Direct Investment (FDI) registration. Under new regulations that will come into effect on July 1, 2024, the registered capital of newly established company must be fully paid up within five years. If there is no prescription in the articles of association, the capital can be paid in CNY or the foreign exchange, only making sure the final amount is equal to the amount of the registered capital shown in the business license.
General account
The general account can only be used for transfers and cash deposits and cannot be withdrawn. A company can only open one basic account with one bank; however, it can open multiple general accounts according to the needs of their business, and the number of accounts is not limited. A company needs to open its basic bank account before opening general bank accounts.
