How to manage bank requirements in China
Once you obtain a business license in China, that means the wholly foreign-owned enterprise or WFOE has been legally established. However, another important consideration is the company's bank account, without which the entity will not be able to carry out its daily operation. The entity must choose a specific bank to open the bank account for the newly established company - this will likely be the first thing to complete after securing the business license.
Once you decide to open the bank account for your WFOE, you might be questioned as follows before the processing work gets started:
1. Are you the legal representative of the company? Have you brought your ID/ passport with you?
2. Where is the registered address of your company? Is it the same place where the staff actually work?
3. Have you talked to your account manager and made the appointment with the bank previously?
You might get the feeling that it will not be a straightforward process to become the bank's new clients when posed these questions.
This is because banks in China are subject to high scrutiny from the People's Bank of China (PBOC), resulting in the emphasis now given to the KYC (know your client) policy. Under PBOC direction, Chinese banks have also become stricter about opening bank accounts since April 2020, especially for newly established companies - no matter whether it is a domestic company or a foreign-invested company.
We will explain the reasons why banks are cautious about opening new accounts and analyze the detailed bank requirements in place across China in this article.
Why have Chinese accountability requirements?
Due to the COVID-19 pandemic, there has been a surge in activities that made banks in China prioritize further internal compliance control. During the outbreak, some organizations and individuals took advantage of the crisis environment to proceed with illegal activities. These activities included gathering personal information from less legally aware individuals (students, elderly people) and opening a large number of corporate accounts under their names. This led to a situation where banks faced the consequences of illegal transactions and money laundering.
Facing increased pressure from the local and country-wide authorities, banks were forced to update their process of opening corporate and personal banking accounts across China. How are banks in China responding to
banks
tightened the challenges posed by COVID-19?
In practice, foreign companies need two accounts to be fully operational in order to open a company in China. The first one is an RMB Basic Account and the second is a Capital Account (which in general is an investment vehicle to China in foreign currency, for example, US$ or EUR).
However, considering the travel ban due to COVID-19, many companies and foreign individuals confronted the burden of being present in the bank to open any kind of bank account necessary for their business to be operational.
As a result, banks in China provided an alternative - that is, video conference confirmation check - to replace the in-person visit to the bank. Additionally, some banks implemented the idea of a virtual interview, with a condition that the documentation of the applicant is legalized at the Chinese Embassy or Consulate of the country that they reside in. There were internal procedures and documentation to follow and provide together with the real-time authentication of the person via the video conference.
The situation dramatically changed in a period of three to four weeks, as bank policies were faced with restrictions and new rules based on internal and regulatory compliance.
Based on the new requirements, banks in China highly recommend that the legal representative come in person with their original passport for the account opening. What are the latest requirements for opening a bank account in China? To validate the "real business" of the applicant, banks have now implemented an onsite visit procedure.
This procedure includes a bank officer visiting the physical location (the office) of the applicants to verify that they have a physical location and staff.