An overview of foreign exchange accounts available to foreigners
For foreigners in China, opening a bank account can often be a frustrating experience. The process is often time-consuming and requires quite a bit of a document to be prepared. The applicant must also agree to the bank investigating their background. Eventually, once the application does get approved, one may discover that some functions they need are unavailable for them.
As a result, we’ve prepared an overview of the types of bank accounts foreigners can open in China, to help you make an easier decision in which one of the accounts meets your needs.
Take a look at some of our previous posts: China’s Seven Priority Areas for Economic Work in 2019
Types of Foreign Exchange Bank Accounts
The accounts listed below are foreign exchange accounts, available for foreign entities or legal persons, who would want to open a foreign exchange account in China. For that reason, be aware that these are different from RMB accounts and that not every foreigner can open an RMB account in China (limited by many factors, e.g. nationality, bank, location).
Types available:
- Non-resident Account (NRA) 非居住账户
- Offshore Account (OSA) 离岸账户
- Hong Kong Bank Account 香港银行账户
- Overseas Bank Account 海外银行账户
Offshore Account
One of the earliest (from 1998) forex account types available in China.
An offshore account, also known as OSA, can be opened by overseas institutions. This must be in accordance with the regulations of the offshore banking business department that obtains the qualification.
Only four commercial banks in China are authorized to open an offshore account for an overseas institution or individual – Shanghai Pudong Development Bank, China Merchant’s Bank, Bank of Communications, and Ping An Bank. The eligible banks have independent departments to deal with OSA accounts, separate from the onshore banking business.
What are then the features of an OSA account?
- The OSA account system implements strict separation management. This means funds sourced from overseas can only be used for foreign businesses.
- OSA accounts cannot provide RMB settlements and sales transactions.
- OSA may handle various types of businesses, e.g. deposits, loans, settlements, financing. Additionally, interest rates can be priced independently according to marketization principles.
- An OSA is not subject to deposit reserve and interest income tax.
Offshore accounts have three major advantages:
- Strong confidentiality – the identity and the shareholder status of the offshore company. Business operations and the share capital remain private and cannot be checked by the public at will.
- A high degree of freedom – the company may be registered in an offshore jurisdiction. Similarly, business operations can be carried out directly anywhere in the world.
- Equivalent to an overseas account – with an offshore account, customers can freely transfer funds with no domestic exchange controls.
Non-resident Account
China State Administration of Foreign Exchange (SAFE) had released a set of rules back in 2009 regarding bank accounts. Consequently, these regulations allow banks, both domestic and foreign, to open foreign currency accounts for foreign entities, the Non-resident Account (NRA).
What separates the OSA and NRA from each other? According to regulations issued by SAFE, it is clear that NR is not the same as OSA. Consider NRA as an upgraded version of OSA, yet they do share a wide range of similarities from an account holder’s perspective.
What are then the features of NRA?
- The funds in the NRA are uniformly used in the bank’s operating positions, and the deposit reserve is paid according to the regulations. However, it needs to be within the scope of the foreign debt indicators as approved by the foreign exchange bureau. As of 2017, the PBOC issued a statement that deposits on NRA no longer occupy the full-scale quota on domestic banks.
- Non-resident enterprises that open accounts the nature of the funds in the NRA account is being treated as being abroad. In this case, the transfer between them and overseas accounts will be handled directly by order.
- The exchange of funds between the NRA account and the domestic account is regarded as cross-border. The domestic collection or transfer enterprise needs to have the corresponding cross border transaction permit and provide the bank with authenticity proof materials. Of course, they must also report the international balance of payments.
The main differences between OSA and NRA are listed below:
Hong Kong Bank Account
Considering the territorial advantages of Hong Kong, it’s no wonder many businesses used to have their operations set up in Hong Kong for convenient business trips to China Mainland. In the past, owning a Hong Kong bank account enabled them to freely transfer money overseas, without worries about the strict restrictions on exchange currencies as applied in Mainland China.
These days, the situation has gotten a little stricter. Hong Kong banks are regulated by the Hong Kong Monetary Authority. The former has issued rigid guidelines as to what is considered a proper bank account application. These regulations are in line with the requirements of the OECD Tax-cooperation and FATF blacklist. These two initiatives have aided in limiting global money laundering and, reducing tax evasion.
Hong Kong is used to being a transient city and is adept at dealing with non-residents who wish to open a basic account. The process is even simpler when the applicant is an EU, American, or Australian passport holder. We’ve also covered opening a business account in Hong Kong here.
Overseas Bank Account
Simply, this is an account, opened in one country, while the cardholder is registered or residing in another country. Opening this account will also give you the right to open an account in other countries. In some instances, the bank might not require the physical presence of the applicant when signing up for a new account. However, this depends on the bank and regulations, so it is advised to check in advance. As an added bonus, these accounts have unlimited international transactions.
As stated before, opening a bank account as a foreigner can be a hassle. Not only due to the documentation that is needed for the account but also there is often not enough information on all the exact requirements and functions of each account. Nevertheless, it’s the type of information any foreign business must know, especially when having a global presence.
As the regulations often vary, depending on the city and province, it’s best to contact an expert in these matters. Get in touch with our team for a consultation.
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