Doing Business with China

Capital account

The capital account is set up for receiving injection of capital, overseas loans and other funds under capital account items. Given that the renminbi is not yet fully convertible , restrictions apply to the exchange of capital account items involving foreign currency conversion.

The capital account is subject to State Administrative Foreign Exchange (SAFE) approval before it can be opened, and only one capital account is allowed per company. Generally, approval is given for the capital account to be opened in the same city in which the venture is registered.

Since 1 July 2002, some items under the capital account can be settled directly with authorized banks via SAFE. Prior to the reform, each settlement transaction for capital accounts first had to be approved by SAFE before being submitted to banks. Now authorized banks are responsible for checking settlements and SAFE oversees bank operations.

The banks involved should report data to SAFE on a daily basis and monthly reports must be submitted.

Current account

The current account is used for remitting and receiving foreign currency trading payments as well as for service charges and fees and dividends to foreign shareholders.

Frequently asked questions about current account items are:

Dividend payments: what is the process for paying a dividend and what documents are needed? When a company opens for business in China, as part of its business licence application it must submit a capital injection schedule to the Ministry of Foreign Trade and Economic Cooperation (MOFTEC). Unless the amount of capital due to be injected within a given financial year has been paid up, dividends cannot be remitted abroad.

The remitting bank can arrange the payment upon receiving the following documents:

• Audited accounts to show profit has been made (compulsory reserves have been made);

• A tax report to show profit tax has been paid;

• A capital verification report to show capital investment has been injected according to the schedule;

• Board resolution to show the amount of funds to be remitted;

• Other documents required by the bank.

Trade payments: what approvals or documents are needed to pay for goods imported into China? Settlement for imported goods invoiced in US dollars does not require prior approval from SAFE, although the remittance bank will have to be provided with the relevant documents. As standard practice, the overseas payment is made from the importer's (FIE's) account and the Renminbi account would only be debited to make up any shortfall. The documents to be provided are as follows :

• Import Payment Reconciliation Form (SAE document);

• Copy of sales (import) contract

• Commercial invoice

• Original bill of lading or air waybill

• Original customs declaration form (the paying bank needs to verify the declaration form online before effecting the payment)

• SAFE registration form

  • when the name of the remitter is not the same as the importer on the customs declaration form or

  • when the importer is not included in the SAFE 'approved importer list' or

  • when the payment is effected via a bank outside the city where the importer is registered

• Agent agreement, when the consignee name on the bill of lading is different from the importer's name on the customs declaration form, buyer of the sales contract and the applicant of the remittance.