If you plan to register a financial company in China or open a bank in China, this material will be useful to you, because we not only analyze the main aspects of banking regulation in China but also provide a brief overview of how the banking sector works in this country.
Conducting banking activities in China
As a rule, Chinese banks are very large. The assets of some of them can amount up to 20 trillion yuan. In addition, the state is behind any Chinese bank. And by no means will it allow a bank to go bankrupt, where millions of people keep their savings.
Chinese banks guarantee a high level of confidentiality.
Today, there are almost no jurisdictions that provide 100% guarantee both reliability and confidentiality at the same time. But Chinese banks are unchanged in this regard. Although China signs certain agreements, it abides by them to the extent that it wants to. In addition, it is much more difficult to exert pressure on Chinese banks than on banks in other countries.
Nobody cares who is the beneficiary
The standard question for almost all American, European, and Hong Kong banks is who is the ultimate beneficiary? Who is the true beneficiary of the company? And they “dig through” all the information to get to specific individuals, and then they ask for the addresses of their place of residence, sources of capital, are interested in their occupation, etc.
Chinese banks are not interested in this matter. They will not even ask such a question. Therefore, the procedure for opening an account with a Chinese bank is much simpler and faster, and, again, the level of confidentiality is higher.
Chinese banks will not freeze your accounts
It is no secret that American and European banks can freeze their customers' accounts with and without it. And the reason may be just reinsurance, even publication in the media. And then to unfreeze your money you often have to spend a lot of time and effort, and not the fact that the result will be positive.
China’s banking sector regulation
Chinese government bodies such as the China Banking and Insurance Regulatory Commission, the People’s Bank of China and local governments hand in hand prudentially supervise the country's banking sector. And banks are required to comply with laws and regulations regarding disclosure of information, equal treatment of customers and fair business conduct. In accordance with the legal regime of the PRC, both Chinese and foreign banks must comply with the rules of protecting financial consumers in order to prevent risks, as well as protect financial security.
Chinese law also obliges financial institutions to take measures to combat the legalization of illegal income. Legislative acts define the conditions and terms for the investigation of illegal financial transactions and the principles of cooperation between the NBK and international financial control authorities.
If a violation is detected during the regulatory audit, penalties can be applied not only to the bank itself, but also to the bank’s personally managing staff.
Registering a bank with foreign capital in China
Previously, global banks could own no more than a third joint venture with Chinese partners. The structure of the joint venture prevented foreign banks from controlling their operations, depositing and withdrawing funds and setting strategic goals. In addition, foreigners often could not agree with Chinese partners on the number of joint venture employees and their salary levels.
Nowadays, the situation has changed. Restrictions on the share of foreign investors in a bank have been removed. Consequently, it is possible to establish a bank in China, which totally belongs to a foreign owner. Activities of branches and rep offices of foreign financial institutions in the country are strictly regulated. In particular, a bank owned by a foreign investor must maintain the minimum amount of paid-in capital established by law.
To acquire a bank in China by a foreign investor, the PRC Administrative Rules on banks with foreign investments is applied. The regulation was substantially revised in 2019.
In recent years, the Chinese government has been more open and positive about foreign investment. The banking sector is actively developing and is actively issuing new legislative acts. One-on-one legal consultation of our lawyers specializing in China’s banking sector will help you better navigate the Chinese financial sector if you want to open a financial firm in China.