HSBC Treasury Management Profiles 2018 -

Current section, Introduction

Introduction

The world’s largest exporter and its second largest economy, China aims to double GDP and per capita income between 2010 and 2020. China is a key driver of the global economy. Domestically, FDI inflows to China saw a 1 per cent decline in 2016, to USD134 billion, due to a fall in FDI in finance. However, FDI flows into non-financial services grew by 8 per cent and China’s pilot free trade zones in Shanghai, Fujian, Guangdong and Zhejiang saw inflows of USD13 billion, an 80 per cent increase. Regional development initiatives, including the Belt and Road and the Beijing-Hebei-Tianjin Corridor, are stimulating infrastructure investment and spurring economic growth. The economy expanded 6.9 per cent in the first half of 2017, above the government’s target for the year of 6.5 per cent; consumption and services (accounting for 54.1 per cent of the overall economy) are key drivers of this growth. However, despite China’s continued economic strength, the OECD has recommended that China addresses its reliance on credit to fuel economic growth, and aim to reduce the risks associated with high levels of corporate and local government debt. China’s debt-to-GDP ratio rose to 304 per cent as of May 2017.

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Legal and regulatory

  • Non-resident bank accounts are permitted in both foreign and domestic currency (RMB)
  • Non-resident RMB accounts can broadly be classified into six categories, including the basic account, used for payroll and cash withdrawal, and temporary accounts, which are typically accounts held outside the city where the legal entity is registered. Foreign currency accounts include free trade accounts which are available to entities operating in the China. Funds from these accounts can ‘more easily’ be transferred by residents and non-residents to accounts in China and abroad. Funds are freely convertible into domestic currency
  • All transactions between residents and non-residents and all transactions involving foreign exchange must be reported to the State Administration for Foreign Exchange
  • There are no exchange controls on current account items

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Taxation

  • Resident companies are taxed on their worldwide income
  • Non-resident companies are taxed on their China-sourced income and income effectively connected with their establishments (if any) in China
  • The standard rate of corporation tax is 25 per cent
  • China-sourced income is subject to withholding tax

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Payment instruments and systems

  • Cash remains an important payment medium in China, particularly for low-value transactions. Electronic credit transfers are used for both high-value corporate and low-value retail payment transactions, although the cheque remains a common payment instrument for commercial payments. Payment cards, particularly debit cards, are a popular method of payment, although increasingly mobile wallet payments are used to pay for small-value items
  • China operates five national payment systems: CNAPS–HVPS, for high-value transfers; CNAPS–BEPS, for low-value transfers; CDFCPS, for domestic foreign currency payments; CIS, for cheque payments; and CIPS, for cross-border RMB payments

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Cash management

  • Domestic and cross-border notional pooling and cash concentration is permitted. RMB cash concentration is typically carried out using an entrustment loan framework

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Electronic banking

  • Electronic banking services are available; there is no bank-independent electronic banking standard
  • Internet and mobile banking services are provided by the country’s leading commercial banks for both corporate and retail purposes
  • The Internet Banking Payment System (网上支付跨行清算系统) integrates the online banking operations of most of China’s banks while the MTPS platform (移动金融安全可信公共服务平台) facilities mobile payments.
  • Internet and mobile banking transactions increased 8.2 per cent and 65.7 per cent respectively in Q1 2017, to 11.3 billion and 9.3 billion

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To read the full report on China and to discover more on these and other topics, including banking and trade, please click on the Download PDF option.

Sources:

  • United Nations Conference on Trade and Development
  • Institute of International Finance
  • Organisation for Economic Co-operation and Development
  • World Bank
  • National Bureau of Statistics

The materials contained on this page were assembled in May 2017 (unless otherwise dated).


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