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Different Bank Accounts

And Their Functions
Introduction In the course of doing business in China, foreign companies (FIEs) will need
to be familiar with the different bank accounts applicable and their respective
functions/uses. In this article, we will introduce some of the bank accounts
commonly used by FIEs.

Temporary Capital Before the official incorporation of a FIE, if it needs cash urgently for the
Account purpose of pre-incorporation expenses, it can choose to set up a Temporary
Capital Account. This account is to temporarily receive funds directly related
to the investment in China. However, this account is not a necessity. It should
be based on the needs and requirements of the company and approval by
the State Administration of Foreign Exchange (SAFE).

Functions The money in the Temporary Capital Account can only be used to pay
rental, utilities and other payments with regard to the pre-incorporation of
the FIE. The money cannot be used for payment of employee salary and
payments relating to the operations of the business. This is because at
this point of time, the company has not been officially set up.
The capital in the Temporary Capital Account is to be injected directly by
the investing party and constitutes part of the total registered capital of
the FIE. The maximum amount of capital in the Temporary Capital
Account is to be maintained at 5% of the total Registered Capital (RC)
and cannot be more than USD 100,000.
The capital monies in the Temporary Capital Account can only be
transferred to other bank accounts and no cash withdrawal is allowed.
When there is a need to use the money in the Temporary Capital
Account, approval must be obtained from the State Administration of
Foreign Exchange (SAFE).

Main Application Apply to the SAFE for FIE Principal Business Certificate and code and
Procedures Set up the Temporary Registered Capital Account in a bank

Foreign Currency When a FIE company is in the process of incorporating and has obtained the
Capital Account Foreign Exchange Registration IC Card, it shall apply for a Foreign Currency
Capital Account. This bank account is used to accept the RC from the foreign
investor. In addition, when the FIE needs to increase its RC, the increased
amount of RC shall be credited to this account.

Functions FIE investors can only inject the FIE’s RC into the Foreign Currency
Capital Account. FIE should take note that the total injected capital
should not be more than the total RC of the FIE.
Within three months after getting the temporary business license, at
least 20% of the total RC has to be injected into the Foreign Currency
Capital Account; the remaining is to be injected within two years. [or as
stipulated in the articles of association]
If the FIE has applied for a Temporary Capital Account, the account shall
be cancelled once the Foreign Currency Capital Account has been set
up. At the same time, all the capital in the Temporary Capital Account
shall be transferred to the Foreign Currency Capital Account and
constitute part of the RC.
When the FIE needs to use the capital in the Foreign Currency Capital
Account, it has to transfer the capital into RMB Basic Account or other
available bank accounts before making payments.

Main Application Apply to the SAFE for FIE Foreign Currency Approval (“外汇业务核准
Procedures 件”),and
Set up the Foreign Currency Capital Account in a bank.

Foreign Currency This account is a foreign currency fund collection and payment account.
Settlement Money from the Foreign Currency Capital Account can also be transferred to
Account this account, to be used for payment purposes.

Functions Funds collected from customers for services can be transferred directly
to the Foreign Currency Settlement Account. However, transactions
relating to the sale of goods have to be paid to the bank’s pre-checking
account (“待核查账户”) which it to be checked by the bank before they
are transferred to the company’s Foreign Currency Settlement Account.
When using this account to make payment, the company has to submit
both invoice and contract relating to the payment, in order for the
transaction to be approved. Approval is granted by the SAFE.
The money in the Foreign Currency Settlement Account can be used for
payment of travel expenses in foreign currency or, less frequently for
payment of salary in foreign currency.
Main Application Application period for the Foreign Currency Settlement Account is
Procedures around 1 to 2 working days.

RMB Basic Bank FIE shall set up the RMB Basic Bank Account at the same time of setting up
Account the Foreign Currency Capital Account. RMB Basic Bank Account enables a
FIE to conduct day-to-day transfer and funds settlement, as well as receipts
and payments of cash. A company can only have one basic bank account.

RMB Basic Bank Account can be used for RMB collections and
Functions
payments and cash withdrawals.
Salaries and bonus payments can only be paid from the basic account.
There are no restrictions on time and minimum amount for deposits or
withdrawal.

Main Application Apply to the SAFE for the Certificate of RMB Basic Bank Account
Procedures Opening Approval (“人民币基本账户开户许可证”),and;
Set up the RMB Basic Account in a bank.

RMB General Bank The RMB General Bank Account is similar to the RMB Basic Bank Account
Account and can be used for RMB collections and payments. However, cash
transactions and payments for salary and social insurance are not allowed. A
FIE can set up multiple general accounts.

Functions For large companies, it is advisable that the RMB General Bank Account
is to be used solely for fund collection purposes while the RMB Basic
Bank Account can be used for payment purposes. This is for better
management of the company’s financial accounts.
For smaller companies, it will not be necessary to have both accounts.
The RMB Basic Bank Account will be able to satisfy the needs of its day
–to-day operations.

Main Application According to regulations, companies are not allowed to set up both RMB
Procedures Basic Bank Account and General Bank Account in the same bank.
Should the bank be the same, it is required that the two accounts are set
up in difference branches.

Foreign Debt When a FIE’s fund is not enough and the investor is unwilling to increase the
Special Account RC for the FIE, the FIE can choose to apply for foreign loan from its investor.
Under such circumstances, a Foreign Debt Special Account is required.
Functions To receive loans from overseas and to make payment as per the loan
contract.
This account cannot be used to pay RMB loan principal and interest.
Each time money is transferred from this account, approval has to be
granted by the SAFE.

Main Application Apply to the SAFE for the Foreign Debt Approval and registration which
Procedures requires around 20 working days and;
Set up the Foreign Debt Special Account in a bank.

Foreign Debt When a FIE needs to repay its foreign loan and interest to the investor, it can
Special Loan set up another account known as the Foreign Debt Special Loan Repayment
Repayment Account. This account is not a necessity as repayment can also be done
Account through the Foreign Debt Special Loan Account.
Function

Functions Repayment of the foreign currency loan principal and interest
Transferred from other foreign currency accounts or exchanged from
RMB.

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etc.
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