One of the biggest frustrations for foreigners in China is opening a bank account. Not only do they have to go through the process of prolonged disturbing document preparation but also accept the bank’s investigation into their background.

Bank Accounts

Understanding the Four Types of Bank Accounts for Expats in China

One of the biggest frustrations for foreigners in China is opening a bank account. Not only do they have to go through the process of prolonged disturbing document preparation but also accept the bank’s investigation into their background. Even once they’ve successfully opened their account, they might still be disappointed to discover that some functions they need are unavailable. So, the first thing is to know what kind of bank accounts foreigners can open in China and the pros and cons of each. 

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After balancing all the factors, choose one that meets your own demand. In our article, we will have a brief comparison of four bank accounts:

 

  • Non-resident Account (NRA)
  • Offshore Account (OSA)
  • Hong Kong Bank Account
  • Overseas Bank Account

 

We are referring to foreign exchange accounts, not accounts withholding RMB currency (Not every foreigner is allowed to open RMB accounts in China; it depends on various factors, such as nationality, location, and bank.)

 

Currently, there are four options for foreign entities or legal persons (body corporates) who wish to open a foreign exchange account in China.

 

1.  Offshore Account

Back in 1998, China started its offshore banking business with some designated banks by allowing them to open forex accounts for foreign enterprises and individuals. Such accounts are called “OSA” accounts in China’s banking administration. 

 

There are only four banks eligible to open OSA accounts for foreign entities and individuals, which are not the state-owned mega banks (such as the Big Four):

 

  • China Merchants Bank
  • China Bank of Communication,
  • Pudong Development Bank
  • Ping’an Bank

OSA accounts are treated the same way as accounts opened with foreign banks. The eligible banks have independent OSA departments, separate from the onshore banking business.

 

2.  Non-resident Account

In 2009, the China State Administration of Foreign Exchange (SAFE) issued new rules allowing all banks in China (domestic or foreign-invested) to open foreign exchange accounts for foreign entities, facilitating foreign investors and Chinese investors to manage their foreign exchange fund.

 

SAFE’s 2009 rules made it clear that such non-resident accounts (called “NRA”) are not OSA accounts, creating now another option for foreign investors to open forex accounts in China.

 

Now, the thing you want to know most is the difference between OSA accounts and NRA accounts. However, it shall be noted that in most aspects, there are really similar to the perspective of account holders.

 

Some brief summaries here:

 

  • OSA can only be opened with the four designated banks as listed above, but you can open NRA accounts with any banks in China;
  • The money in NRA accounts is counted in calculating the short-term foreign debt balance of their opening banks, but funds in OSA accounts are not so counted. This will give OSA banks the unlimited power to open as many foreign exchange accounts as they wish and are not restricted by foreign debt balance limitations.
  • Foreign individuals can open OSA accounts but cannot open NRA accounts.

 

3. Hong Kong Bank Account

There was a time, about 10 years ago when Hong Kong banks welcomed companies that operated on a virtual basis outside of the HK territory. Taking the territory advantage of Hong Kong, businessmen often travel between Hong Kong and mainland China for business and own a Hong Kong bank account, which allows them to freely transfer money overseas and avoid China’s strict restrictions on currency exchanges. However, as you must have noted by now, those days are long gone. 

 

Banks in Hong Kong are regulated by the Hong Kong Monetary Authority, which has issued strict guidelines as to what constitutes an appropriate bank account application.  Unfortunately, these guidelines are dictated by two major international initiatives; the OECD Tax Co-operation 2010 and FATF black-list 2012.  What these two publications and subsequent compliance accomplished was to limit the ability of virtual companies to move money around the world (i.e. reduce money laundering) and to a lesser effect reduce tax evasion. 

 

Over the appearance of a virtual presence which is probably why your application was rejected. Having a Russian or American passport only complicates things if the OECD and FATF requirements are not met first.

 

4.  Overseas Bank Account

Hong Kong is a global financial center. You’re able to open a bank account from other countries as well, and the bank doesn’t require your physical presence. These bank accounts also serve your purposes on unlimited international transactions. 

 

However, there might be some controversial discussion on your physical presence. Below is our research on different overseas banks with regard to opening bank account service, but in reality, some banks might still need you to be on site. It depends on the following:

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To help you better understand the differences between the above four types of bank accounts, we summarized their features in one chart:

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For many foreigners, opening a bank account in China is really frustrating. In most cases, the bank account opening checklist provided by the bank does not clearly demonstrate substance, which is very important in global business these days. In China, the wording regulations and the implementation of laws on different levels among cities make it much more confusing.

 

Last but not least, HiTouch is experienced in bank account services for foreigners. We know banks’ exact requirements, which are not particularly stated on their checklist. If you need any services on opening a bank account, feel free to talk to us.

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