Economic and regulatory context
Mainland China is the world's second-largest economy. In 2025 its GDP exceeded ¥140 trillion for the first time (¥140.19 trillion, +5%, about US$20 trillion). Its financial and regulatory system uses the yuan and CIPS instead of dollar correspondent banks, Golden Tax and fapiao for accounting, and SAFE exchange controls instead of free capital movement. Foreign businesses operate under a "national treatment up to admission + negative list" model: the 2024 Negative List retains 29 restricted positions, while manufacturing is fully open.
China attracts foreign capital through targeted incentives: foreign investors who reinvest dividends from a Chinese company into encouraged industries receive a 10% tax credit on the reinvested amount (2025–2028). Dividends paid by a foreign-invested company to a foreign individual have been taxed at 20% since 1 September 2026 (MOF/STA Announcement 2026 No. 27), ending an exemption dating from 1994.
China is used as an operational jurisdiction rather than for structuring ownership. Its main uses are market access, manufacturing and supply chains; the holding company, capital and personal status more often remain in Hong Kong or Singapore. Hong Kong provides the usual access to CNH liquidity, Stock Connect and banking services without entering mainland compliance.
| Topic | Related article |
|---|---|
| Company registration and first-year costs | Company in China: WFOE, SAFE, fapiao |
| Bank account eligibility | China banks for foreign trade |
| Payments to and from China | Payments to China |
| Bank restrictions on payments and goods | Chinese bank restrictions |
| Work permits and residence | Residency in China |
| Visa-free entry and transit | Visa-free entry and transit |
| Holding companies for Chinese businesses | Hong Kong: companies, banks, status |
| Succession to Chinese assets | Intestate succession in China |
Russia–China trade and sanctions
The Russia–China goods flow in 2025 in China customs statistics — three reference figures.
| Flow | 2025 |
|---|---|
| Russia–China trade turnover | US$228.1 billion (−7% from the 2024 record) |
| China's imports from Russia | US$124.8 billion |
| China's exports to Russia | US$103.3 billion |
Practically all Russia–China export and import operations are settled in rubles and yuan, as Russia's President stated after the talks of 20 May 2026, so all the practical mechanics come down to yuan routes and a given bank's willingness to process them.
Secondary sanctions affect bank access: EO 14114 (22 December 2023) authorises US sanctions, including a ban on US correspondent accounts, against foreign banks that conduct or facilitate significant transactions involving Russia's military-industrial base. Acceptance of Russia-linked flows by Chinese banks changes over time. Payment routes and sending-bank-to-Chinese-correspondent pairings: payments with China.
Banks screen goods separately from funds, comparing HS codes with the EU sanctioned-goods list and their own exclusion lists (Chinese bank restrictions). Alternative payment routes outside China are arranged in advance: a Kazakhstan RUB/CNH route and Freedom Bank for personal banking; broader relocation arrangements: Relocation from Russia.
Companies and business presence
Forms of business presence, in ascending order of obligations: representative office (no commercial activity: procurement, quality control and market research; procedures and costs: work and residence permits in China), WFOE (100% foreign ownership, full access: fapiao, hiring, export VAT refunds), joint venture (when a Negative List industry requires a Chinese partner, or the partner brings licenses and distribution channels).
Company registration rules: Company in China.
- registered capital must be paid up within 5 years (Company Law 2024); the amount stated in the charter determines the contribution obligation
- annual financial reports must be audited by an accounting firm (Company Law art. 208); the annual EIT reconciliation 汇算清缴 follows, and the annual report goes to the market regulator between 1 January and 30 June (Enterprise Information Disclosure Regulations art. 8); fully digitalised e-fapiao have been in use nationwide since 1 December 2024 (STA Announcement 2024 No. 11)
Regional choice affects the servicing bank, available incentives and the speed of administrative procedures:
| Region | CIT | Profile |
|---|---|---|
| Shanghai | 25% (HNTE 15%) | trade, finance, consulting; the simplest banking arrangements for foreigners |
| Shenzhen | 25% (HNTE 15%) | electronics, hardware, business connections with Hong Kong |
| Hainan (FTP) | 25% (the 15% rate for encouraged industries with substantive operations under Caishui [2020] No. 31 applied from 2020 to 31.12.2024) | since 18.12.2025 — island-wide customs, 74% of tariff lines at zero rates; economic substance is checked strictly |
| Hangzhou | 25% (HNTE 15%) | e-commerce (Alibaba ecosystem), customs models 9610/1210 |
| Chengdu | 25% (WDS 15% until 2030) | manufacturing, back-office; rail to Europe |
| Harbin | 25% (HNTE 15%) | trade with Russia and the CIS, a Russian-speaking environment, banks for RMB/RUB |
Taxation
| Tax | Rate | Comment |
|---|---|---|
| CIT | 25% | on the worldwide income of a Chinese resident |
| CIT preferential | 15% | HNTE; encouraged industries in the western region (to 2030) |
| CIT for small companies | ~5% effective | first ¥3M of profit, extended to 2027 |
| VAT | 13% / 9% / 6% | three-level schedule (STA); the VAT Law has applied since 1 January 2026; input credit only against correct fapiao |
| WHT on dividends | 10% to a foreign company; 20% to a foreign individual (since 01.09.2026) | RU–China and Mainland–HK treaties: 5% for a company holding at least 25% (the RU treaty also requires at least €80,000); a 10% credit for reinvestment (2025–2028) |
| IIT | 3–45% | residency from 183 days; the six-year rule for worldwide income — in the residency article |
Export VAT is refunded where the declaration, payment, contract, purchase fapiao and correct goods code form a consistent documentary chain. This is one of the main economic arguments for a WFOE over procurement without the buyer's own legal entity in China.
Banks
A corporate account at a Chinese bank depends on actual Chinese economic activity: suppliers and buyers in China, settlements in yuan and trade finance. For a pure holding company or transit business without a China footprint, a Chinese account is less suitable than a Hong Kong or Singapore account; the bank identifies that lack of operational connection immediately.
| Segment | Banks |
|---|---|
| Big Four | BoC, ICBC, CCB, ABC |
| Joint-stock | Everbright, Ping An, Huaxia |
| Regional | Harbin, CZCB, Dalian, Langfang |
| Hong Kong banks | BOCHK, HSBC HK and digital banks in Hong Kong |
Account-opening timelines and conditions for Russia-linked applicants, bank-specific services, exclusion criteria and service codes: China banks for foreign trade. CZCB procedures: online banking login, payments, statements, currency exchange.
Hong Kong banks include HSBC Hong Kong, Hang Seng Bank, and Bank of China (Hong Kong) and digital banks of Hong Kong with connections to mainland China: livi bank (transfers to mainland China), Ant Bank HK (the Alipay ecosystem), Fusion Bank (WeChat Pay). Where a bank account is unnecessary, alternative digital payment providers include Airwallex, Wise Business, Currenxie and Payoneer. Licensing differences: Neobanks.
Personal banking and everyday payments
A foreigner applies for a personal bank card in person at a commercial bank branch with a passport or a permanent-resident ID card, and each bank sets its own additional checks. For short trips Alipay or WeChat Pay with a linked foreign card is enough: after passport verification the limits are US$5,000 per transaction and US$50,000 per year; fees follow the app's and the card issuer's terms. Without a Chinese phone number no onboarding works at all.
Payments and currency control
Cross-border yuan infrastructure indicators
| Circuit | Metric |
|---|---|
| CIPS, participants | 211 direct and 1,642 indirect (end-August 2026, CIPS operator announcement of 4 September 2026) |
| Yuan in SWIFT | 2.73% of global payments by value, sixth place (December 2025, SWIFT RMB Tracker) |
Yuan payments that CIPS carries without SWIFT messaging do not show up in the SWIFT figures.
CNAPS, CIPS, SWIFT and UnionPay
China's payment, messaging and card services use different infrastructure components. CNAPS (China National Advanced Payment System) is the People's Bank's domestic payment system: HVPS clears large amounts in real time, while BEPS handles retail netting. All mainland yuan transactions reach final settlement in this system. CIPS handles cross-border settlements with non-residents, using ISO 20022 messages and participants' accounts in CNAPS for finality. SWIFT remains the messaging system for most indirect participants; a "payment via CIPS" is therefore often visible in SWIFT tracking. UnionPay handles card payments, while e-CNY is the digital component.
Payments to mainland banks almost always require, in addition to the SWIFT BIC, the 12-digit CNAPS code of the recipient's branch (the equivalent of a local routing number). Regional branches often have no BIC of their own; without a CNAPS code, the payment requires manual handling. The recipient's and bank's names are also provided in Chinese. Payment routes and correspondents: payments to China.
SAFE exchange controls apply to all flows, with the bank conducting the initial review:
- capital contributions are received into a dedicated capital account and converted into yuan as permitted use arises
- dividend payments are made only after the annual audit, payment of CIT, a tax clearance and the bank's review of the corporate resolution; 10% withholding for a foreign corporate shareholder (5% under some tax treaties), 20% for a foreign individual since 1 September 2026
- service payments and royalties abroad require a contract, an invoice, proof of the service, and withholding-tax documents — each route undergoes an economic-substance check
- currency purchases by individuals draw on an annual convenience quota; purchases above it need documented grounds
- the first payment on a new route always takes longer to clear; a predictable history under a single contract is the principal practical consideration
See also: three payment checks and payment routes, HS codes and stop-lists, trade finance and Sinosure, and paying suppliers and marketplaces through platforms such as WorldFirst and PingPong.
Investment and market access
Direct access by foreign private capital to the mainland market remains restricted. The established channels include Stock Connect (Shanghai and Shenzhen shares via HKEX infrastructure without a China account), Bond Connect (the interdealer debt market), QFII/RQFII for institutional volumes. For large private capital, these channels provide legitimate China exposure without entering mainland compliance. Almost all established channels run through Hong Kong. A Chinese company seeking a listing chooses among thirteen Asian segments: the Shanghai and Shenzhen boards, HKEX, SGX, Tokyo, Korea and Nasdaq Dubai. Criteria for comparing listing venues in Asia include free float, lock-up and gatekeeper screening.
Crypto operations have been banned since 2021; crypto arrangements are established outside the mainland, usually via Hong Kong. China participates in CRS: accounts with foreign controlling persons are reported to their country of tax residence (tax-information exchange).
Residency and status
- Residency in China: work permit, Z visa, and permanent residence — the A/B/C points system, routes via WFOEs and representative offices, the K visa for STEM (since October 2025), the five-star card and the IIT scale
- China: visa-free for Russians — visa-free entry for Russian citizens extended to December 31, 2027; 240-hour transit
- Documents: since November 7, 2023 China is in the Hague Convention — Russian documents are accepted with an apostille, without consular legalization
- Tax residency — 183 days, the six-year rule for worldwide income, fringe-benefit reliefs through the end of 2027
Capital and inheritance
Inheritance is governed by the 2021 Civil Code. The orders of succession, shares and succession planning: Intestate succession in China. For family assets with a Chinese element, the practical rule is the same as for business assets: ownership is structured outside the mainland (Hong Kong, Singapore), while operational assets in China retain a defined succession arrangement.
Documents, ownership and compliance
- Apostille and legalization — since November 7, 2023 China has been in the Hague Convention: Russian documents for banks, work permits and transactions carry an apostille instead of consular legalization
- AML/KYC for the private client — source-of-funds and source-of-wealth documentation requested by a Chinese bank at onboarding
- Beneficial ownership and nominee — the UBO is disclosed to the bank and reported under CRS; nominee arrangements do not work in China
- Economic substance — an office, staff and local decision-making: a condition for regional preferential regimes and the resilience of a holding company above the WFOE
- Over-the-counter crypto settlement (OTC USDT) — crypto-liquidity arrangements for China-related transactions operate outside the mainland, usually through Hong Kong
- Holding structures — holding jurisdictions above a WFOE: Hong Kong, Singapore, Luxembourg
Typical scenarios
Trade without a presence
An HK Ltd or another foreign company uses a China-trade account through Chinese banks for foreign trade or a neobank, with yuan payments through CIPS. A WFOE is used where fapiao, local contracts and export VAT refunds are required.
Timeline: depends on the bank and applicant profile. See Chinese banks for foreign trade.
A WFOE for an operating business
Company registration is followed by obtaining seals, setting up tax and e-fapiao processes, opening a bank account and registering capital with SAFE. An audit and 汇算清缴 are carried out annually.
Company registration: procedures, timelines and costs in China.
Founder relocation
The sequence comprises a WFOE or RO, apostilled documents, a notification letter and a Z visa, followed by work and residence permits. An application for permanent residence comes at a later stage.
Work and residence permits: application procedures and timelines.
China exposure for private capital
For investment rather than operations, exposure is obtained through a Hong Kong company and account (HSBC HK / BOCHK), Stock Connect and Bond Connect for mainland securities, and CNH yuan liquidity without China's exchange controls. No mainland entity is established; all reporting and compliance remain in Hong Kong.
Business uses and limitations
Applications
- Manufacturing, procurement, and supply chains — direct contracts with factories, fapiao, and export VAT refunds
- Yuan settlements — CIPS provides independent clearing without dollar correspondent banks
- Regional and sector incentives — Western Development 15% (to 2030), HNTE 15%, small companies ~5%
- Access to the domestic market — a WFOE with 100% foreign ownership in open industries, e-commerce through the Hangzhou zones
- A sanctions perimeter separate from the Western one — with clean goods and transparent documents; bank screening remains strict
- Talent and infrastructure — the engineering market, logistics, rail routes to Europe
Limitations
- Holding and structuring — CIT 25% on worldwide income, currency control, inflexible distributions: the holding stays in Hong Kong or Singapore
- Storing capital — deposit protection of ¥500K, withdrawal control, a bank review of every large flow
- Residence without an operating function — residency derives from work, and inactive status is not renewed
- Confidentiality — e-fapiao data is held in the tax authority's system; accounts are reported under CRS
- Crypto-native operations — banned since 2021; crypto arrangements are established through Hong Kong
- A quick exit from investments — repatriation goes through an audit, a tax clearance, and SAFE: weeks, not days
China vs Hong Kong
| Objective | Jurisdiction of choice |
|---|---|
| Fapiao, hiring in China, export VAT refunds | Mainland China (WFOE) |
| A holding for Chinese assets | Hong Kong |
| Yuan liquidity without mainland compliance | Hong Kong — CNH, BOCHK |
| Foreign-trade settlements with Russia | Mainland regional banks — Harbin, CZCB; routes in payments to China |
| Investing in Chinese securities | Hong Kong — Stock Connect, Bond Connect |
| Personal residency | Hong Kong is easier (TTPS/QMAS); in China — only through work |
| Profit tax | Hong Kong: 8.25/16.5% territorial; China: 25% on worldwide income with 15/5% reliefs |
| Capital movement | Hong Kong — a free port with no currency control; China — SAFE and a capital account |
| Sanctions and bank compliance | Hong Kong — UN sanctions and banks' extraterritorial compliance; China — its own perimeter and concern about secondary sanctions |
For a business with Chinese operations, the practical combination is a Hong Kong company for financial functions and a WFOE for its operating presence. Hong Kong holds capital and contracts and provides currency flexibility; the mainland entity provides fapiao, staff and local contracts. Dividends from the WFOE to Hong Kong are subject to 5% withholding under the tax treaty for qualifying participation.
Four possible structures for business financial operations are a Hong Kong company, a Singapore company, a stand-alone mainland WFOE and a UAE company. Their comparison uses six criteria, including access to CIPS (Hong Kong vs Singapore for China trade). Holding companies above these structures can be assessed through a comparison of ten jurisdictions (holding structures).
Common mistakes
A WFOE without bank pre-screening
A company can complete registration and still be refused an account: banks view a virtual address, unexplained capital and sensitive jurisdictions in payments as weak KYC documentation. A second filing already carries a rejection history. Bank pre-screening precedes registration and the account application.
A company for residency with no activity
For work and residence permits in China, work-permit renewal is assessed against IIT records; work permits based on inactive companies are not renewed. If there is no operating business, a representative office is cheaper.
High registered capital
Under the Company Law, an LLC's registered capital is paid up within 5 years. The amount in the charter creates a contribution obligation, and the auditor and bank check the actual contribution.
Treating CIPS as a payment guarantee
CIPS provides payment infrastructure; acceptance depends on the particular bank's compliance assessment of HS codes, counterparties and the origin of funds. Payment routes are selected in accordance with the bank's risk policy, with a backup route.
Inadequate fapiao records
Without incoming fapiao, neither VAT deductions nor expense recognition are available; e-fapiao data is held in the tax authority's system. Preparing accounts from PDFs at year-end is not sufficient: the auditor first has to reconstruct the books, increasing cost and time.
Dividends without preparation
A payout requires an audit, a tax clearance and a bank review; 10% withholding for a foreign company (5% under some tax treaties), 20% for a foreign individual since 1 September 2026. From 2025 to 2028 a 10% tax credit applies for reinvesting dividends into encouraged industries; it is often not used.
Working on visa-free entry
Visa-free entry covers negotiations and trade shows, but not paid functions. On-site office checks are common practice; a violation closes off future statuses.
Questions and answers
Company and profits
Is a Chinese company required for procurement in China?
Up to a certain volume, procurement does not require a Chinese company: neobanks and a Hong Kong company with an account are sufficient. A WFOE is justified where fapiao, local contracts and export VAT refunds are required; it entails a local presence with an audit and SAFE compliance.
Can a foreign company open an account at a Chinese bank?
Yes. An HK Ltd or another foreign company can open an account for China trade (Chinese banks for foreign trade). Access depends on the goods, counterparties and owner rather than bank branding; a Russia-linked profile narrows the choice to regional banks.
How is profit repatriated from a WFOE?
Dividends are paid after CIT, the audit and a tax clearance; 10% withholding at source for a foreign company (5% under some tax treaties), 20% for a foreign individual since 1 September 2026. Service payments and royalties are possible, but each undergoes a SAFE economic-substance check. Repatriation has no fast route and is planned around the audit calendar.
Payments
What determines bank acceptance of Russia-linked payments?
Acceptance of Russia-linked flows changes over time, and secondary-sanctions risk under EO 14114 shapes each bank's policy. Payment routes: payments with China.
Do Alipay and WeChat Pay work with a foreign card?
Yes: after passport verification — US$5,000 per transaction and US$50,000 per year; fees follow the app's and the card issuer's terms. For everyday living a local bank card helps: a foreigner applies for one in person at a bank branch with a passport.