Opening a corporate bank account in China has always been fairly straightforward. However, regulatory compliance at Chinese banks is becoming increasingly strict which is cause problems to foreign investors.
Unlike in Hong Kong for example, the process of opening a bank account in the Chinese Mainland has does not require KYC (Know Your Client) and due diligence procedures. The big Chinese banks such as the Bank of China and the Industrial and Commercial Bank of China (ICBC) have always welcomed foreign-invested companies to open their bank accounts at their branches, with very limited KYC procedures in place to review the actual business of these companies. The whole account opening process for a new foreign-invested enterprise (WFOE) usually takes 3-4 weeks.
This contrasts to opening at foreign-invested banks such as HSBC and Standard Chartered, which offer a full range of banking services but adhere to international standards when it comes to the intake of business. The Chinese branches of foreign banks have always had more elaborate compliance systems and relatively high KYC requirements and as a result, the process can take longer.
Therefore, the main challenge, especially in the case of Chinese banks, is procedural; and unfortunately, this is becoming more difficult. Banks have always preferred the company’s legal representative to come to the bank in person to sign documents, but considering the hassle and potential delay when involving a non-Chinese legal representative residing abroad, most banks have traditionally been more flexible: the legal rep.’s original passport or a notarized / legalized copy has always been sufficient to convince a local branch to accept an application to open a new bank account.
In recent months however, we have seen a change in this attitude. There are still bank branches that take a more flexible approach – accepting the original passport or in some cases, confirming the legal representative’s approval through a WeChat call or recording. These exceptions are often made based on the good relationship between a specific bank branch’s officers and the corporate service provider in charge of the bank opening process.
Under the guidance of internal policies from China’s central bank however, the number of branches that dare to remain flexible is diminishing. In most cases, the legal representative is now required to come to visit the local branch in person.
Stricter banking rules present foreign investors with a dilemma. Since the legal representative position comes with much power (e.g. the legal rep. is legally permitted to represent the company towards third parties including the government), many international companies wisely prefer to appoint someone from headquarters in this position. But then:
China is always changing, and the current trend is towards stricter compliance. This noticeably translates into stricter processes, including in relation to the opening of corporate bank accounts. Unfortunately, this also presents some foreign investors with new difficulties on how to arrange matters safely but efficiently. Foreign investors are recommended to plan ahead and seek appropriate advice from a service provider with the right level of experience.
Acclime China supports international investors on company set-up and provides administration services to Chinese subsidiaries of foreign companies, including accounting / tax filing, custodial services, payroll, and banking / treasury support. Acclime China cooperates closely with R&P China Lawyers, a leading Chinese law firm that supports international business in China. For more information on how Acclime China can help to manage, control and develop your business in China, please contact Maarten Roos at email@example.com.