China Business Guide Part 2: The banking system

In this six-part business guide to doing business in China produced by Hawksford, we’ll give an overview of what you need to consider before entering the market. Ranging from localisation, to the legal and banking systems, to type of company set up. This series is a great jumping-off point to understand the many nuances of doing business with China.

PART 2: The banking system 

The Chinese banking system is large relative to the size of the Chinese economy and has expanded significantly over the past decade.

The People’s Bank of China (PBOC) has considerable authority over the Chinese banking system. Aside from having the typical responsibilities of a central bank for monetary policy and representing China on the international stage, the PBOC’s role is to reduce overall risk and promote the stability of the financial system. The PBOC also regulates lending and foreign exchange between banks and supervises the payment and settlements system in China.

The PBOC controls five largest state-owned banks in China, namely the Industrial and Commercial Bank of China (ICBC), the Bank of China (BOC), the China Construction Bank (CCB), the Agricultural Bank of China (ABC) and the Bank of Communication (BCOM). Together these banks account for around half of Chinese banking system assets and deposits.

China has also allowed a dozen joint-stock commercial banking institutions and more than 100 city commercial banks to operate in the country. There are also banks in China dedicated to rural areas of the country. Foreign banks are also allowed to establish branches in China and to make strategic minority investments in many of the state-owned commercial banks.

Opening a bank account

RMB basic account
The first account regulated to be opened in mainland China
Allows for RMB payments, transfers and cash withdrawal

Capital account
RMB or foreign currency account
Receives capital from the shareholders as regulated
The capital to be received needs to be pre-approved by the Chinese government

Current account
Foreign currency account(s)
Each account can only support one type of currency
Used for foreign currency settlement (such as trade or labour services)

Look out for our upcoming deep dive series on China’s banking system that will be out in December 2020 coming soon

PART 3: The tax system 

Read the full report here

To learn more about accessing the China market contact wilson.barrie@cbbc.org for more information