CHINA

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China’s nominal GDP was USD 14.7 trillion in 2020 while its GDP measured on a purchasing power parity (PPP) basis is the largest in the world. China is the world’s largest exporter of goods (its global market share increased to 15% in 2020), a global industrial leader and a global financial player. The process of capital account liberalisation and RMB internationalisation is ongoing and the opening of local asset markets to non-resident investors has progressed rapidly recently. Meanwhile, controls over resident capital outflows remain significant.

China’s exchange rate regime is a managed float. The Chinese currency has gradually become more flexible and market-driven in recent years, but government influence on the direction of the FX rate remains high. The RMB was included as the fifth currency in the IMF Special Drawing Rights (SDR) basket in October 2016.

Economic growth fell to 7.1% per year in 2012-2019 from 10.7% in 2002-2011. In 2020, the COVID-19 crisis demonstrated the Chinese economy’s strong capacity to absorb a major shock and rebound; real GDP returned to its pre-crisis level at the end of Q2,2020 and economic growth reached 2.3% in 2020 overall. It should rebound to close to 8% in 2021, although the correction in the property market in H2,2021 has fuelled downside risks on growth in the short term.

In the medium term, China’s structural slowdown is projected to continue. China continues a difficult economic transition: its investment/export-led growth model has reached its limits and far-reaching reforms are still needed to build a more balanced growth model that is more reliant on consumption and services, and less dependent on debt. Key goals of Beijing’s medium-term strategy include: first, the rapid development of high-tech sectors aimed at sharply reducing China’s dependence on foreign inputs; second, less polluting economic growth; and third, the achievement of “common prosperity”, with priority given to improving the social safety net and reducing inequality. This could help boost household consumption. At the same time, this strategy also implies a risk of sudden regulatory changes, which may affect local confidence and private investment.

The transition process also requires major deleveraging of corporates and local governments and a cleaning-up of practises in the financial sector. Vulnerabilities in the financial system have grown steadily since the early 2010s as a result of the domestic credit boom and the rapid expansion of shadow banking activities. The authorities have started to tighten the financial sector’s regulatory framework since 2016. Corporate debt deleveraging also started in 2017 but was interrupted by the COVID-19 shock. The number of corporate defaults is expected to increase in the short term as the authorities are likely to prioritise the reduction of financial instability risks.

Summary

BNP Paribas was the first foreign bank to open a representative office in Beijing in 1980, becoming a branch in 1997. The bank was awarded the Greenwich award for “Quality Leader Large Corporate Cash Management No 1", Total Asia, 2018. The bank has four business centres in Shanghai, Beijing, Guangzhou and Tianjin , and a further 16 retail locations, together with full service retail banking through Bank of Nanjing.

It is one of the few international banks catering for both the domestic and international cash management requirements of customers, both foreign companies doing business in China and Chinese entities seeking to expand their international focus.The bank has a full RMB licence to serve all types of corporate clients in all currencies.

BNP Paribas is a major player in trade finance throughout Asia, offering a full suite of traditional trade (letters of credit, bankers’ guarantee, trade financing, standby letters of credit, etc.) and supply chain financing solutions (receivables purchase programmes, supplier financing etc.) products, including a unique inventory solution offered through our trade centres in Australia, China, Japan and Singapore, specifically for companies engaged in international trade, as part of a wider network of more than 100 trade centres globally. BNP Paribas has experienced trade finance advisors and personnel who deliver a range of customised trade solutions and advise on local market practices. These solutions are supported by the bank's ISO-certified trade services support team.

Currency

  • Renminbi (RMB). Onshore RMB is referred to as CNY; offshore RMB is referred to as CNH.

Bank accounts

  • A company is generally considered to be resident in China if it is incorporated or effectively managed or controlled in China, unless the enterprise is regarded as resident in another country under a double tax treaty.

BNP Paribas Cash Management Capabilities

Cash collections
Cheque collections
Direct debit collections
Domestic incoming transfers
Virtual IBAN
Virtual accounts
International incoming transfers
Card acquiring

Payments & collections

China has embraced the digital payments revolution. In Q3 2020, 64.97 billion electronic payments were processed with a value of RMB 696.4 trillion; mobile payments reached 34.5 billion, with a value of RMB 116.74 trillion, a year-on-year increase of 26.5% and 35.6% respectively. Having trialled a scheme to replace paper money with a digitized version of the Renminbi, China’s is on target to become the first country to introduce a digital economy. QR codes are a common method of payment with Alipay and WeChat Pay the largest digital payment platforms in the country; both platforms have registered over a billion users. Over 94% of people use WeChat Pay or Alipay as their primary payment method.

Electronic banking services are available from most banks. There is no national electronic banking standard in China, so companies use banks’ proprietary services. Online and mobile banking services are widely available and hugely popular, given the high numbers of smartphone users using their devices to access the internet (approximately 99% of users).

The Internet Banking Payment System (IBPS) integrates the online banking operations of most of the country’s large domestic and foreign banks. Customers can make online transactions in real time, as well as access real-time account information via the IBPS. The limit for a single transaction is RMB 1M.

Short term investments

Interest payable on credit balances

  • Interest-bearing current, checking and demand deposit accounts are permitted.

Demand deposits

  • Demand deposits denominated in RMB or major foreign currencies are available.
  • Banks are free to set rates on EUR, HKD, JPY and USD deposits if amounts are equal to or higher than USD 3 million or its foreign currency equivalent. The interest rate on amounts less than USD 3 million denominated in EUR, HKD, JPY and USD, is subject to a ceiling published by the central bank.

Time deposits

  • Time deposits are available in RMB or major foreign currencies for terms ranging from one week to one year.
  •  Banks are free to set rates on EUR, HKD, JPY and USD deposits if amounts are equal to or higher than USD 3 million or its foreign currency equivalent. The interest rate on amounts less than USD 3 million denominated in EUR, HKD, JPY and USD, is subject to a ceiling published by the central bank.
  • Foreign currency time deposits are available for terms ranging from three months to two years.

Certificates of deposit

  • CDs can be issued paying fixed or variable interest. Fixed rate CDs have terms of a year or less. Variable interest CDs have maturities greater than one year.
  • In 2021, the PBC approved the launch of foreign currency interbank CDs.

Treasury (government) bills

  • Short-term Treasury bills are issued by the Chinese government. Terms vary.

Commercial paper

  • Domestic commercial paper and corporate bills are issued by companies. All commercial paper in excess of RMB 3 million is required to be issued electronically.

Money market funds

  • Domestic money market funds are available in the interbank market.

Repurchase agreements

  • Repurchase agreements are increasingly commonplace in China.

Bankers' acceptances

  • These are not common in China.

BNP Paribas Trade Finance Capabilities

Documentary credits
Documentary collections

International trade

  • As a member of the Asia Pacific Economic Cooperation (APEC) forum, China has agreed to liberalise trade and investment rules between member states.