New Landscapes of Doing Business in China - Practical Guidance for UK Businesses Selling Goods and Services into China
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New Landscapes
of Doing Business
in China
Practical Guidance for UK Businesses
Selling Goods and Services into China
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The following document has been published with contributions from the following organisations:
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New Landscapes of Doing Business in China 01
Contents
Foreword from Dominic Jermey, CEO, UK Trade & Investment 02
Foreword from Stephen Phillips, CEO, China-Britain Business Council 05
About UK Trade & Investment 06
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About the China-Britain Business Council 07
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Where to Begin? Researching the Market 08
Overseas Market Introduction Service 10
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Market Visits and Trade Missions 11
Sell online with UKTI’s e-Exporting Programme 13
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BOC RMB e-Express - Contributed by Bank of China 14
Establishing a Presence 16
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UK Export Finance (UKEF) 18
How UKEF helps 19
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Renminbi Internationalisation and What This Means for Your Business - Contributed by HSBC 20
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China’s Free Trade Zones Accelerates Wider Economic Reform - Contributed by HSBC 23
Exporting to China with RMB - Contributed by HSBC 25
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Why RMB? - Contributed by Bank of China 26
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How to Use RMB in your Business - Contributed by Bank of China 27
RMB Products/Services Bank of China offer to Facilitate your Business - Contributed by Bank of China 28
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Key Factors for Doing Business in China - Contributed by Deloitte 30
China’s Investment Environment - Contributed by King & Wood Mallesons 32
Shanghai Free Trade Zone - Contributed by King & Wood Mallesons 34
Considerations for Investing in China via Hong Kong - Contributed by King & Wood Mallesons 36
How do I Protect my Investment? - Contributed by King & Wood Mallesons 37
How do I exit my investment? - Contributed by King & Wood Mallesons 39
Index of Useful Contacts 41
02 New Landscapes of Doing Business in China
Foreword
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UK Trade & Investment is at According to China’s Ministry
the heart of the UK’s long-term of Commerce (MOFCOM), UK
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economic plan – with success in exports to China are up 20%
international markets like China on the year since October 2013.
a cornerstone of our strategy. China remained the UK’s seventh
biggest export market in 2013.
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The support we give to British European exporter to China. UK’s
firms as they trade around the exports to China are growing 3
globe and the welcome times as fast as our imports from
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we extend to those who China.
invest here are critical to
securing our country’s long But there is still much more that
term future. we should do in the UK
to make the most of this
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China is the great economic exciting opportunity and
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reap the rewards of doing
success story of the past 30
business with China.
years. Previously an agricultural
society, urbanisation reached If the last decade was all about
over 52 per cent in 2013. China is “Made in China”, the next
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the world’s second largest decade will be all about
economy after the United States “Made for China”.
and the biggest trading partner
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for most Asian economies; it is UK Trade & Investment (UKTI)
the world’s largest exporter, and helps UK-based companies
the single greatest destination succeed in the global economy,
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offering expertise and contacts
for global direct investment.
through its extensive network
of specialists in the UK, and in
It is a huge and expanding market British embassies and other
for UK businesses. UK exports of diplomatic offices around the
goods to China have more than world. Working across the UK,
doubled since 2010 and increased China and Hong Kong, UKTI helps
by over 37% in the last 2 years. companies in Britain increase
They were worth £12.4 billion in their competitiveness through
2013, up by 18% from 2012. overseas trade in China.
New Landscapes of Doing Business in China 03
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UKTI also encourages the best The UK has a wealth of financial
overseas companies to look to and professional service
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the UK as their global partner of providers who can offer expert
choice. help in doing business with China.
This guide was written in
In cooperation with the collaboration with some of
China-Britain Business Council
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those experts, providing
(CBBC), UK Trade & Investment insights and a basic roadmap
(UKTI) is on hand to assist you to doing business with China.
on every step of the way in doing
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business with China. Britain has always been one the
world’s great trading nations.
Whilst the rise of China is easy By harnessing our collective
to acknowledge, business cannot expertise we can really open up
always do it alone, but, exciting opportunities across the
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whether selling, trading, globe, creating jobs and wealth
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investing or franchising, China at home.
offers opportunities in
abundance to UK companies, large
of small.
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This guide gives useful
information and points of contact Dominic Jermey
to those best placed to assist
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Chief Executive,
your business in opening up those
opportunities, giving an overview UK Trade & Investment
of some of the
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practicalities and considerations
to take into account whether just
starting out on the journey to
selling goods and services into
China or whether further along
that road, to setting up a physical
presence on the ground.
04 New Landscapes of Doing Business in China
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New Landscapes of Doing Business in China 05
China-Britain
Business Council
(CBBC)
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At the same time, we are seeing This guide offers you practical
fast-moving developments advice on how to capitalise on
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around the internationalisation the enormous business
of the Chinese currency, the opportunities China presents. I
Renminbi (RMB). As the leading hope you find it valuable and take
global financial centre, London the opportunity to learn from the
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has a unique role to play in this fantastic range of expert
– and is very much doing so. speakers. Like the team at CBBC,
Britain and China have agreed they all share a passion to help
The Chinese economy continues a series of steps that will both and encourage British and
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to expand and rebalance offering cement London’s role as a global Chinese companies to do good
a wide range of exciting offshore hub for trading the business together.
opportunities. Despite lower Chinese currency the RMB and
growth rates of around 7% p.a., act as the spring board for One thing I am sure you will
in absolute value terms the London to also become a hub for read in this guide is that China
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economy will grow by almost 3 RMB investment into China. In requires sustained commitment.
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times the growth a decade ago. late 2014 RMB became the fifth It does.
What is more, the shape of the most-used currency for global
Chinese economy is changing and payments, according to data from That is why day-in, day-out, more
that means more and more SWIFT, after the value of RMB than 120 professionals at CBBC
opportunities for British payments more than doubled in a are here to support you. And if
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companies to work with year. But these developments are you are in any doubt whether
Chinese business both in China not just the domain of bankers China might be right for you,
and increasingly outside China in the City. Businesses across CBBC can help: we have
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too. The changing shape of the the length and the breadth of supported companies from every
Chinese economy is reflected in the UK can make effective use of conceivable sector and of every
the ever-stronger UK-China trade RMB-denominated services and size, to realise the China
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and investment relationship. products to be more opportunity. So I encourage you
Chinese consumers are more competitive and to manage to contact any of CBBC’s 23
sophisticated and more discerning. risk more effectively. offices across the UK and China.
Chinese businesses are more and We exist for one reason only -
more sophisticated too, looking So the opportunities are aplenty. to help more UK companies do
to move up the value curve and But at the China-Britain Business more business with their
looking for partners from around Council we know that China is not Chinese counterparts.
the world with world-class always straight-forward. And we
products and services. know that for many businesses
The Chinese government knowing where to start and
continues to drive reform and or how to proceed can
opening up, including the sometimes be daunting.
Stephen Phillips
development of Free Trade
Zones across the country. Chief Executive,
China-Britain Business
Council (CBBC)
06 New Landscapes of Doing Business in China
About UK Trade & Investment
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UK Trade & Investment is the
government department that If you are interested in doing
can help you achieve your
international business potential. business in China, please
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We combine the national resources
contact either your local UKTI
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of the Department for Business,
Innovation and Skills (BIS) and
the Foreign and Commonwealth
International Trade Adviser
Office’s (FCO) global network of
(ITA) at www.gov.uk/ukti or
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Trade Development Staff,
to help you successfully win
business overseas.
your local CBBC China-Britain
Business Council business
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We treat every business as an
individual – that’s why we provide adviser at www.cbbc.org
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a tailored service with specialist
support covering a wide range
of industries.
In China, the China-Britain
Business Council delivers the
majority of UK Trade &
Investment’s services and also
now handles general enquiries.
UK Trade & Investment and CBBC
also employ a number of Business
Advisers. And maintain close links
with UKTI in Hong Kong in order to
facilitate Hong Kong as a
springboard into China.
New Landscapes of Doing Business in China 07
About the China-Britain
Business Council
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The China-Britain Business Council
(CBBC) is the leading organisation We picked out a few questions often raised by
companies and advisers. Ask yourself and see if you
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helping UK companies grow and
develop their business with China. know the answers before you start venturing
into China.
CBBC supports British companies
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of all sizes and at every stage of • What are the unique selling points to your
market entry with practical business proposition? Will there be a market
in-market assistance, industry for your product and services?
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initiatives and a membership
programme offering support, • A
re there any legal barriers to your
access and significant networking business model?
opportunities. CBBC works closely
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with UK Trade & Investment and • Where in China would you start?
has a strategic partnership with
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the British Chamber of Commerce • D
o you have sufficient resources
in Beijing, providing reciprocal (management time, project finance
membership of both organisations and expenses) to fund your China projects?
and access to a network of nine
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offices in the UK and eleven offices • W
ho will be leading the project
at key locations across China. within your company?
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CBBC’s business-led Board and • D
o you need to work with a partner in
professional team have extensive China to succeed? Can you communicate
firsthand experience of doing with them effectively?
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business in China, and with 60
years of engagement, CBBC has • H
ave you evaluated business risks (such as
built up exceptional connections protecting your IP) and conducted research
with government and business and due diligence?
throughout the country.
• D
o you know how to secure payment and get
the right quality products?
• Would Hong Kong be a safer place to start?
• R
arely will one have answers to all the
questions above, and this “knowledge gap”
forms the basis of further research
and investigation.
08 New Landscapes of Doing Business in China
Where to Begin?
Researching the Market
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Doing business with China can Speak to an expert This can be used in a wide variety
seem rather daunting for those of ways to help your business
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new to the market, but taking a UK Trade & Investment with its particular needs when
strategic approach is the key to provides support for UK entering the Chinese market.
making the process manageable. companies through a network of Possible ways in which OMIS can
International Trade Advisers help your business include:
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Companies should conduct reliable (ITAs) based in the
research before venturing into English regions. UK Trade & • Market research & analysis
business in China. Good research Investment services are also
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saves costs and improves the available to companies in • Sector reports
efficiency and impact from the Scotland, Wales and • Market initiative
start of a project. Northern Ireland. • Regulatory
environment
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General introductory business In addition to the international
information concerning China is trade teams across the country, • I dentification of
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increasingly available and CBBC has a number of China local contacts
companies can obtain a reasonable Business Advisers (CBAs) around
amount of preliminary information the UK who have extensive • Agents
through desk research. knowledge and practical • Distributors
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experience of doing • Suppliers
UK Trade & Investment and the business in China across a • Potential partners
China-Britain Business Council range of industries.
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work closely together to offer a • In-market activities
range of support services to The Overseas Market
British businesses in the China Introduction Service (OMIS) is a • Meeting arrangements
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market. UKTI service delivered by CBBC • Market initiative
in China and UKTI in Hong Kong. • Event organisation,
This service can assist you by such as work shops,
undertaking tailored research seminars, promotional
using our extensive network activities and product
of dedicated researchers launches.
across China.New Landscapes of Doing Business in China 09
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Overseas Market
Introduction Service
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UKTI’s Overseas Market How the service works • a
dvice on local conditions,
Introduction Service (OMIS) can including competitors,
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help your business at any stage As a first point of contact, a UKTI regulation and standards
of exporting - from finding International Trade Advisor or
• a
dvice on accessing and
opportunities to setting up in an adviser from Scottish
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influencing decision makers
another country. OMIS puts you Development International,
in touch directly with UKTI staff Welsh Government or Invest • a
rrangements for a
in over 100 overseas markets. Northern Ireland will work with promotional event
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It can help you: you on your export plan. The
adviser will then contact UKTI’s The local experts will then
• a
ccess the right international local experts who will carry out discuss, develop and agree
contacts or partner research on your behalf. a quote. This can include:
• fi
nd the best way to do Work can include: • pre-visit research and support
business in a market • a
ppointments with target
• likelihood of success in the customers or potential
• a
chieve a successful market market and market entry business partners or agents
entry strategy strategies
• o
rganisation of receptions,
• increase profits by using • b
usiness opportunities meetings or seminars for
effective overseas promotion and identification of you to present your
possible partners product or serviceNew Landscapes of Doing Business in China 11
Market Visits and
Trade Missions
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Visiting China is an invaluable part of the process of market entry. You will experience
the marketplace first-hand, and make the contacts necessary to do business. This is
essential, but will be much more effective with careful planning.
UKTI and CBBC organise regular trade missions to China, where you can benefit from
group activities in addition to your own programme.
The UKTI Overseas Market Introduction Service (OMIS) can be used to support visits
providing bespoke meeting arrangements with appropriate potential partners, agents
and distributors or with relevant government officials.12 New Landscapes of Doing Business in China
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Sell online with UKTI’s
e-Exporting Programme
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China presents an increasingly Elsewhere in this document the To find out more about UKTI’s
tantalising market for brands complexities of establishing a e-Exporting Programme, visit
looking to expand their corporate entity in China have gov.uk/e-exporting or speak to
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e-commerce presence been highlighted. Selling on your local UKTI office to set up
internationally. Chinese citizens these e-marketplaces, removes a meeting.
are moving beyond being able the need to establish a Chinese
to only afford the basics in life, corporate entity. Benefits
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and their discretionary spending
Furthermore, as the urbanisation Demand for British goods from
is taking off, according to recent
of the Chinese population online consumers in China is
McKinsey analysis.
continues apace and internet growing fast. UKTI have
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According to the Chinese Ministry penetration is increasing, negotiated discounted rates for
of Commerce, China’s 302m online hundreds of millions of new UK retailers and brands to list
shoppers spent $296bn in 2013, consumers become accessible their products on some of the
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the huge potential of the region is to UK companies. world’s major e-marketplaces.
staggering. McKinsey forecast that These include, Newegg (USA),
UKTI’s e-Exporting Programme
the country’s online retail market Mercado Libre (Latin America)
will be as large as the US, Japan, Being at the vanguard of and Tmall (China), Laso (Japan),
e-commerce, UK companies are
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UK, Germany and France VIP (China), XIU (China)
combined by 2020. well placed to take advantage
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of digital opportunities that will To find out how you can list sell
UK brands have difficulty
allow them to access your products through global
accessing the Chinese online
international markets. e-marketplace, book an
consumer through own branded
UKTI’s e-Exporting Programme appointment with a Digital Trade
online stores, as most Chinese
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can help UK retailers and brands Adviser through your local UKTI
buy from leading e-marketplaces
accelerate their global growth office. If you’re looking to sell
such as Tmall, JD.com etc. Famous
online for the first time, you can
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brands such as Burberry, Karen via online channels in a number
of ways: also get help with:
Millen, Apple and Superdry, all
have their flagship stores on Tmall. • gain help and advice on • trademark registration
The fact that this explosion of
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building your online presence
spending is taking place on from UKTI’s dedicated Digital • website URL registration
e-marketplaces like Xiu. com, Trade Advisers
JD.com (Global), YHD.com, Tmall
• increase the reach of your • landed cost calculation
(Global) and many more, offers
enormous opportunities for UK brand globally
• packaging, shipping, payment
companies to access that demand. • receive introductions to
leading e-marketplaces • tax registration
around the world
• set up on e-marketplaces quickly • marketing and related services
• attend UKTI’s
retail/e-commerce themed
events and webinars14 New Landscapes of Doing Business in China
BOC RMB e-Express
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Bank of China (UK) Limited – RMB e-Express solutions provide UK e-Exporters an alternative way to improve
your business performance while selling your products online to the vast China market.
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On top of standard sterling account services, we offer competitive RMB account services in UK.
GBP/US$ BOC UK: RMB e-Express
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UK e-Exporter & others
With our RMB account, you have many choices!
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� Better communication by your side
� Deposit your RMB in interest bearing account with
competitive interest rates
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� Better cash management to do RMB conversion in one go
UK
� Take advantage of competitive RMB exchange rates to
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Goods GBP/US$
GBP and some other currencies as you decide when and at
which rate (onshore/offshore) to sell RMB*
� Comprehensive RMB banking services available: RMB
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trade finance & FX products
Alipay: instant RMB
Sell goods on
conversion to GBP/US$ for
e-marketplaces: RMB
each transaction at their
e.g. Tmall (Alibaba)
chosen rate
China
Goods RMB
Chinese business partners/
customersNew Landscapes of Doing Business in China 15
RMB Current Account
• RMB receipt and payment, remittance
• F
acilitated by both Bank of China Shanghai Branch and Bank of China (HK)Ltd, support T+0 and T+1
cross-border RMB clearing;
• Bilingual (English and Chinese) payment inquiry services.
• Interest bearing account (term deposit) for surplus RMB at competitive rates 1
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• Online access to RMB account
• Required Documents (similar to those you will need to open a GBP current account in the UK)
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RMB Trade Finance
• Pre-shipment finance against purchase order;
• Export invoice discounting;
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• Finance against export credit insurance
• RMB Factoring (management of receivable, finance without recourse to exporter, etc)
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*For instance, when you receive RMB payments from your Chinese clients, you could choose to hold it in your RMB account earning interest
and convert it into GBP/US$ whenever needed.
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Please contact us to obtain information about our current interest rates available.
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RMB Conversions
• Deliverable RMB spot and forward to hedge foreign currency exposures;
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• T
he major currencies on-offer include: Chinese Renminbi (RMB), Australian Dollar (AUD), Canadian Dollar
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(CAD), Swiss Franc (CHF), Danish Krone (DKK), Euro (EUR), British Pound (GBP), Hong Kong Dollar (HKD),
Hungarian Forint (HUF), Japanese Yen (JPY), Norwegian Krone (NOK), New Zealand Dollar (NZD), Polish
Zloty (PLN), Swedish Krona (SEK), U.S. Dollar (USD), Singapore Dollar (SGD), Silver Ounce (XAG), Gold
Ounce (XAU), South African Rand (ZAR), etc.
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Internet Banking
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• Online access to view balance, real-time exchange rate, term deposits details and transaction history
• Faster payment (in GBP): free (maximum limits £100,000 per transaction for corporate customers) 3
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Forwards, Swaps, and Options are available to clients classified as Professional Clients. Please contact us to obtain further information on
these products and to understand their risks and features.
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Please refer to Corporate Internet Banking Tariff on http://www.bankofchina.com/uk/ for more details.
Legal Disclaimer
The material included in this brochure and any associated material (collectively, the “Material”) has been prepared by Bank of China (UK)
Limited ‘’the Bank’’ should be regarded as a marketing communication, and it has not been prepared in accordance with the legal and
regulatory requirements to promote independence of research. It is, therefore, not independent from the interests of the Bank which may
conflict with your interests. The Material has been prepared for information purposes only and no representation, warranty or assurance
of any kind, express or implied, is made as to the accuracy or completeness of the information contained herein. The Material should not
be regarded as a recommendation to buy, sell, subscribe to or invest in any securities and financial products or investments or to obtain
finance from the Bank. People reading the Material should consult their own professional advisers before making decision to obtain
banking, investments or financial products from the Bank. To the extent permitted by applicable law, the Bank disclaims liability for any
error, omission or inaccuracy in the Material and shall not be responsible for any loss or damages that are incidental to or resulting from
any use or reliance on the Material including any opinions expressed therein. The Material is protected by copyright. No part of it may be
modified, reproduced, transmitted and distributed in any format for commercial or public use without prior written consent from the Bank.16 New Landscapes of Doing Business in China
Establishing a Presence
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Given China’s sheer size, complex and changing business
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envionment, as well as culture and language barriers, it is not
an easy market to enter and exit with a quick win. To succeed
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in China requires careful business planning and execution.
Foreign companies need to take time to build up their business
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network and credentials and to demonstrate their commitment.
Often this requires some sort of presence in the marketplace,
whether directly through your own business operation, or
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indirectly, working through a strategic partnership such as
an agent or distributor.
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Agents and distributors • Distribution channels • P
rovide regular training for
the sales staff and after-sales
• Regional coverage
An agent is a company’s direct training for the technical staff
representative in a market and is in the UK.
• Types of outlets covered and
paid commission, while a
frequency of calling
distributor sells products on to • L
inking performance to
customers after buying them from incentives and agreeing
• Transportation and
the manufacturer – their income milestone targets.
warehousing facilities
comes from the profits they make
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on the difference. Establishing a
• Are they right for you?
permanent presence
Market entry through working with
• Does the agent/distributor
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an agent or distributor can have Although it is possible to be
have a genuine interest in
several advantages, such as represented through agents or
representing your product?
reducing time and costs to distributors, many foreign
market entry as well as gaining companies progress to the
• Can they benefit from actively
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the local knowledge and network establishment of a permanent
promoting your interests (is it
of the agent. presence in China, as their
a win-win)?
experience and confidence grow.
However, there are some Having a permanent presence
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• Do they also represent
drawbacks to this approach. in-market can provide several
any competing
Employing a third party results in possible benefits, including:
companies/products?
an additional cost to your
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products and you may also lose • M
arket presence – showing
• Can you communicate
some control and visibility over commitment.
effectively with your
sales/ marketing. It also has
counterpart?
implications for intellectual • C
utting out the “middle man”
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property rights protection, – direct access to the end
Once a working relationship is
increasing the risk of your product customer/supplier.
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established, the agent/
being copied or counterfeited.
distributor needs to be managed
• D
irect control over corporate
actively; this may be achieved by
Given the above considerations, strategy and activities.
the following:
companies need to select agents
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and distributors carefully. Some • E
nables trading in local
• V
isiting as regularly as is
of the frequently asked questions currency and eases the con-
practicable at a senior
are in the following checklist. You duct of business transactions.
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management level – this shows
should also conduct due diligence
interest in, and commitment to,
to verify this information. • F
ulfils a legal requirement to
the agent and the market. This
have a permanent presence
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will also provide you with an
• Background (relevant in certain business
opportunity to learn about
activities and sectors).
• Company size, history conditions in the market and
and ownership (private see how your products
or state owned) are faring.
• Quality and quantity of • W
orking closely with the agent
the sales force to show them how they can
profit from your products.
• Customer feedback and
trade/bank references • H
elping to prepare marketing
and sales plans for the agent.18 New Landscapes of Doing Business in China
UK Export Finance
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UK Export Finance (UKEF) Responsibilities • Help overseas buyers to
provides trade finance and purchase goods and services
UKEF works closely with
insurance solutions to support from UK exporters by
exporters, banks, buyers and
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UK exporters. It is the UK’s export guaranteeing or funding bank
project sponsors and has 90
credit agency, helping UK loans to finance the purchases
years’ experience of supporting
exporters by providing insurance (including guarantees on loans
exports to, and investments in,
to exporters and guarantees to in offshore Renminbi)
markets across the world. It does
banks to share the risks of
this principally by providing loans • Share credit risks with banks to
providing export finance. In
to buyers of UK goods and help exporters raise tender and
addition, it can make loans to
services and guarantees and contract bonds, in accessing
overseas buyers of goods and
insurance and reinsurance pre- and post-shipment working
services from the UK. UK Export
against loss. capital finance and in
Finance is the operating name
securing confirmations of
of the Export Credits Guarantee It can:
letters of credit
Department (ECGD), a ministerial • Insure UK exporters against
department. • Insure UK investors in overseas
non-payment by their
markets against political risks
overseas buyersNew Landscapes of Doing Business in China 19
How UKEF helps
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If you are planning to export
goods or services from the UK
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then it is likely you’ll need some
form of credit guarantee or
insurance to protect you against
non-payment or to help finance
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the export contract.
If you can’t get what you need
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from the private market, UKEF
may be able to help. Working
across a wide range of sectors,
UKEF can consider support for
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exports to over 200 countries.
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It has its own risk assessment
framework and our focuses on
helping UK exporters maximise
the opportunity to do more
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business overseas.
It has a network of regional export
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finance advisers to act as local
points of contact to introduce
exporters and businesses with
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export potential to finance
providers, credit insurers,
insurance brokers, trade
support bodies and sources
of government support.20 New Landscapes of Doing Business in China
Renminbi Internationalisation
and What this Means
for your Business
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What is Renminbi?
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The renminbi (RMB) – the official economic status. The Chinese Offshore RMB markets are
currency of China – is poised to government policy is to promote developing rapidly around the
join the US dollar and the euro as international use of the RMB world with official RMB clearing
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one of the world’s top three global in three stages through trade, banks now appointed in
trading currencies. investment and as a reserve countries across Asia, Europe,
currency. This represents new Middle East and the Americas.
The renminbi (RMB) is the opportunities for companies. Offshore borrowing and
currency of the People’s Republic lending are market-driven and
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of China and the unit is the yuan. As the RMB is not yet fully not subject to the regulations
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In this sense it is very similar to convertible, the Chinese that set interest rates on the
the use of sterling (the currency) government has promoted an Chinese mainland. Offshore
and the pound (the unit). The ‘offshore’ market where RMB RMB is now actively used for
terms yuan and renminbi are often can be used outside the Chinese cross-border trade, finance and
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used interchangeably in the West. mainland, separate from the direct investment while rapid and
‘onshore’ market used by successive waves of liberalisation
The Chinese government is domestic companies, Chinese are opening onshore markets to
ith
actively seeking to internationalise residents and foreign companies trade, financing and investment.
the RMB to match China’s global with a Chinese presence.
WNew Landscapes of Doing Business in China 21
19
20
ay
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Moves to full convertibility Of the companies HSBC surveyed, execute your expansion
17 per cent already used the RMB strategy, providing services
China is gradually opening
for cross-border trade such as to help with capital
channels for capital to flow
21
settlement, and over a quarter injection and reduction;
between the Mainland and
of those who don’t, plan to do payments; investments; and
international markets, and
so in the future. shareholder loans all compliant
investors are being given greater
with Mainland authorities.
accesses to both onshore and Cross-border trade settlement
Dividend payments can be paid
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offshore RMB. HSBC expect full
Invoicing in renminbi outside and received in renminbi and
convertibility on the capital
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China is now unrestricted and your there is no restriction on the
account to occur by 2017.
business can conduct almost all maximum amount of individual
Trade cross-border trade transactions renminbi payments for trade or
with mainland Chinese companies capital accounts.
According to the HSBC RMB
dr
in renminbi, using accounts and
Internationalisation Survey 2015 Managing risk
documentation support from
54% of businesses expect growth
HSBC. Since June 2012, all With foreign exchange hedging
in international/cross-border
ith
companies in mainland China with in renminbi, companies could
trading with China in the coming
import and export qualifications reduce risks in invoicing and
12 months and 86% of existing
can initiate and receive payments lower the transaction costs of
RMB users said that import and
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in renminbi for goods, services trade and investment.
export was the most common RMB
and other account items under
transaction. As one of the most active
China’s Renminbi Trade Settlement
participants in offshore
You could negotiate better prices Scheme. HSBC also offer a wide
renminbi foreign exchange and
and reduce foreign exchange costs range of renminbi trade financing
a registered dealer on the
on your China trade by settling and funding options.
Mainland, HSBC provides
trade transactions in offshore
companies with a comprehensive
renminbi. Chinese government Build your business on the
set of risk management
liberalisation has made the Mainland with HSBC
instruments for trade
renminbi into a fast-growing
As a registered Chinese bank, and financing.
international trading currency.
HSBC can help you establish and
Total offshore cross-border
manage operations on the
settlement in June 2014 reached
Mainland. HSBC will work with you
RMB547 billion for the month, up
to execute your expansion to
by 64 per cent year on year.22 New Landscapes of Doing Business in China
19
20
ay
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21
n
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Complete renminbi hedging tools HSBC provides deliverable Companies can fund renminbi
currency and interest rate offshore and on the Mainland
HSBC provides deliverable hedging tools, including swaps, with HSBC. Offshore, HSBC offer
dr
forwards, options and swaps options and forwards. We can full renminbi trade financing
as well as access to the active help hedge all the transactions facilities, loans and the capability
non-deliverable market, which and transfers permitted by to raise bonds in a range of
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predates liberalisation of the Chinese regulators, including countries. All working capital,
renminbi. Offshore, HSBC clients debt and working capital trade and receivables finance
can choose between renminbi repayment; income and can be used outside China while
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non-deliverable forwards and expenses; capital injections; bonds and loans raised offshore
options as well as an active and income remittance. can be remitted onshore to
deliverables market. finance business activities in
Financing China subject to approvals by
Manage risks in the Chinese authorities.
mainland operations Renminbi financing allows
international businesses to All financing is subject to a
Companies wishing to transact on participate in the growth of detailed credit assessment
the Mainland can turn to HSBC to the Chinese economy by using and approval.
manage foreign exchange risks. China’s own currency to manage
HSBC are the leading foreign bank working capital, fund expansion,
in the interbank FX spot, forward match receipts with payments
and swap markets. and boost their profile in among
Asian investors.New Landscapes of Doing Business in China 23
China’s Free Trade
Zones accelerates wider
economic reform
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20
March 2015 While the SEZs of the 1980s
focused on the development of
The intention is to lessen the
burden for foreign organisations
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The launch of China’s new Free manufacturing and exports, the wanting to conduct business in
establishment of the free trade mainland China by removing
Trade Zone (FTZ) programme is
zones is significant progress in certain financial and currency
set to take the country’s financial
accelerating financial sector impediments and administrative
reform journey into a new chapter.
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liberalisation which is a crucial constraints imposed on foreign
step in taking China’s deepening investors elsewhere in China. The
China has a recent history of using
economic reforms to the next zone is also being used as a
special economic zones to
21
level. Free trade zones will also test-bed for new arrangements
experiment and act as sandboxes have a major catalysing im-
for future development on a using different tools to
pact on cross-border trade and encourage efficiency and
national scale. In the past 30 investment flows, whilst boosting
years, the country has achieved innovation, including lower-cost
growth in domestic services
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phenomenal economic growth financing opportunities using
and innovation. equity or debt solutions.
from an agricultural backwater
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to the world’s factory and second A number of FTZs were
largest economy by creating The zone in Shanghai is
announced in quick succession
Special Economic Zones (SEZs) to accelerating capital market
since 2013, from Shanghai to
lead the way. These SEZs were development domestically and
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Guangdong, Fujian and
given greater autonomy and will also, over the longer term,
Tianjin. Each represents a zone
successfully tested the market contribute to the eventual
of development intended to
operation of the renminbi as
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economy. However, the play to the strengths of each
long-standing advantage in foreign regional location. a freely convertible currency,
trade stemming from cheap labour initially in a carefully
and low cost of land and resources China’s central government controlled area.
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cannot last. recently expanded the Shanghai
free trade zone, by including sites After Shanghai FTZ came into
China’s “next phase” of growth such as the Lujiazui financial operation, two-way renminbi
will partially depend on the district, making it larger than any flows arising from cross-border
successful development of its of the new FTZs. We believe the sweeping reached more than 27.2
pilot free trade zones – a new expansion will allow Shanghai to billion yuan, between January
breed of economic zone. give full play to the advantages and August last year. We believe
to test reform on a larger scale. that the offshore borrowing for
firms in the Shanghai free trade
The Shanghai FTZ is seen as zone will be relaxed further –
taking the role of creating a and that the new regulation will
regulatory and operating include banks – is a
environment for testing new significant breakthrough.
initiatives and market reform.24 New Landscapes of Doing Business in China
The risks associated with the A new wave of cooperation Zhuhai can be expected to
zone are proving manageable. between Guangdong and Hong continue to foster economic links
A negative list was put in place Kong will focus on developing with Macau. Nansha has an
to restrict foreign funds from an integrated regional service existing development zone, and
investing in specific industries industry. The province’s future the local government has a
within the zone. This list has since lies in reorienting its consumer stated ambition to attract more
been shortened, demonstrating industries towards China’s large investment in manufacturing,
the Chinese government’s growing and growing domestic market trading, education, logistics
level of confidence in the zone. The and upgrading from low-end and tourism.
19
commercial banks are enforcing manufacturing to develop the
know-your-customer procedures high-end services sector. With Given its geographic advantage,
to ensure that the funds moving China’s largest and most open Fujian is one of the wealthiest
in and out of China are supporting regional economy, Guangdong regions in the country and will
20
genuine trade. and Hong Kong can lead the way focus on further strengthening
to high quality growth, with links with Taiwan. Current major
Since the Shanghai FTZ was benefits flowing to both. industries of both regions are
announced, more cities have geared towards electronics,
launched their own FTZ plans. Hong Kong, Taiwan and Macau petrochemicals and mechanical
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FTZs in Guangdong, Fujian and together contribute to over 31 components.
Tianjin will be modelled on per cent of Guangdong’s trade,
Shanghai’s, but would rather mainly driven by Hong Kong Tianjin free trade zone is
advance a new round of the
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contributing 24.6 per cent. Hong expected to focus on high-end
country’s opening and reform, Kong is also the largest source manufacturing, financial leasing
based on their different economic of foreign direct investment in and further integration of the
and geographic locations. Guangdong, accounting for 65 Bohai Bay area. It will also
21
per cent of Guangdong’s GDP. provide deeper connections
We believe the expansion of the The investment now flowing into with neighbouring Japan
free trade zones will have a Guangdong has been and South Korea.
significant effect on Hong Kong, diversified from manufacturing
Macau and Taiwan in various to the service sector. Guangdong There is much work remaining
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aspects, especially services firms will benefit from Hong Kong’s to be done. A lot of financial
such as banks, e-commerce, well established services reforms in favour of liberalisation
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foreign traders and other high-end sector and broader have been announced and are at
innovative service providers. The international standing. the early stage of
free trade zones may prove a development. However, China
magnet to Hong Kong, Macau and We expect Qianhai to play a big has always sustained a cautious
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Taiwanese investors due to their role in leading financial reforms approach to financial reforms
geographic proximity. Businesses in through Hong Kong-Shenzhen that could possibly disrupt the
greater China need to be prepared collaboration as efforts to economy. The free trade zone
ith
and monitor developments of the bring greater convergence of chapter in China’s economic
free trade zones in tapping cross-border business. It also development has only just begun,
mainland China’s huge market. takes up its intended role as and further free trade zones will
an experimental laboratory initiate broader reform
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Guangdong’s FTZ consist of three for renminbi liberalisation and and growth.
regions: Guangzhou Nansha, strengthen Hong Kong’s role as
Shenzhen Qianhai Shekou and an offshore renminbi centre. Helen Wong
Zhuhai Hengqin New District. It Chief Executive,
will play a key role in deepening Hong Kong’s firms need to prepare Greater China, HSBC
economic cooperation with Hong for the challenges posed by the
Kong and Macau to drive the rapid development of free trade
liberalisation of trade in services. zones in China. We need to think
of the position of Hong Kong when
the renminbi is freely convertible.
Hong Kong needs to work more
closely with Guangdong province
and to keep close watch on the
opportunities arising from the
internationalisation of renminbi.New Landscapes of Doing Business in China 25
Exporting to China with RMB
Top tips
19
Recent developments mean that China’s currency can be used for cross border trade and a range of other
transactions. If you export to China, it’s worth exploring whether you could benefit from switching your
trade currency to RMB. Explore the potential of RMB trade
20
• If you are looking to grow your sales to China, offering to receive RMB in payment could be a smart move.
Being open to receiving RMB may help you win new customers, and some Chinese buyers may be willing
to offer better pricing or terms in return for the convenience of paying in their own currency. It is up to
ay
you to ask the right questions to your buyers,
for example: M
1. Is foreign exchange risk a concern for you? Would
paying for imports in RMB help you?
2. How do you finance your imports at the moment?
21
3. Are you looking to improve your cash flow?
n
• If your customers currently borrow to finance their imports, you may be able to obtain better rates for
RMB trade finance outside China than your customers can access in China – creating a great opportunity
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to negotiate a better deal for you both.
• B
anks in China are often more willing to issue a long-usance letter of credit in RMB than in other
currencies, in support of customers’ working capital requirements. Knowing this may help your buyers
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improve their cash flow by extending their payment terms under the letter of credit which may provide
you with an opportunity to agree on a better price.
ith
• D
o not be surprised if your buyers are not fully familiar with RMB trade, which is still relatively new. Since
mid-2012, every Chinese importer or exporter has been permitted to conduct cross-border trade in RMB,
in a very similar way to trade in other currencies.
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• Keeping reserves in RMB could provide you with potential gains if RMB appreciates.
• T
here is a range of possibilities to hedge your RMB risk. Speak to your relationship manager, who can help
you explore potential options.
• If you plan to trade using RMB, consider where to open an RMB account. Three common choices are your
home country; a well-established RMB Centre (I.e Hong Kong and London); or mainland China. This
decision largely depends on where your key employees are located, though there are some differences in
the requirements and features of these three options.
• T
here is a range of places to turn for advice on doing business with China, including your local chamber
of commerce, government trade and investment body or embassy in China. HSBC has over 140 years of
experience in China and is the largest foreign bank in the country.26 New Landscapes of Doing Business in China
Why RMB?
19
20
Trading with China
Bank of China is the most internationalised bank in
China, providing a comprehensive range of
ay
financial services to customers across the
mainland China as well as 42 countries and regions. M
Cross-border RMB business provides enterprises
with the right to use their preferred settlement
currency and brings substantial benefits to
enterprises as follows:
21
• E
xtend markets: exploring the business
opportunities in China and sharing China’s
economic growth.
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• H
edge risks: reducing the dependence on one
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currency and hedging the exchange rate risk.
• E
nhance efficiency: reducing conversion cost,
shortening clearing time, and increasing the
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efficiency of utilisation of funds.
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• I ncrease profits: decreasing contract price with
the enhanced bargain power by using RMB as the
settlement currency; making full use of on-shore
and off-shore RMB markets, lowering the cost of
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financing and currency conversion, and making
extra profits.
Investing into China
• E
xtend markets: exploring the China market and
leveraging on its
economic growth;
• E
xtend business scope: providing an alternative
choice of raising funds, providing customers with
cross-border RMB settlement, clearing,
conversion, bond issuance and underwriting,
as well as RMB investment, etc.New Landscapes of Doing Business in China 27
How to use RMB in your business
For Importers:
Check with your Bank to see
if your potential Chinese
19
counterparty is on the list of
the PBOC’s ”close
monitoring enterprises”
20
Chinese exporter can enjoy
the export tax refund
How to get RMB?
ay
� Buy from BOC at a
competitive exchange rate
(with genuine trading
background, you can buy
M
RMB using on-shore CNY
rate)
� Obtain a short-term trade
finance product from BOC
21
� Issue RMB bond
� Others
Chinese
UK Importer Shipment of goods
Supplier
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For Exporters:
There are no extra
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document requirements for
exporting goods to China
except the normal business
papers
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With RMB received from Chinese
importer, you can
� Deposit RMB with BOC to enjoy
interest returns;
� Buy other currencies from BOC;
� Invest in RMB bonds through BOC;
� Buy goods from China
� Repayment of RMB loans
� Many others
Chinese
UK Exporter Shipment of goods
Importer28 New Landscapes of Doing Business in China
RMB Products/Services
Bank of China offer to
facilitate your business
19
20
Bank of China offers a wide
range of RMB banking
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services to business
customers in the UK. From
assisting you in your day to
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day banking operation, to
borrowing money for your
21
business, and helping you
trade with China, Bank of
China aims to become your
trusted RMB partner to do
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business in the UK, China
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and internationally.
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1) Account services and credit facility
Business Current Account Business Current Accounts
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• A
vailable in Sterling, US Dollar, Euro, RMB, • Instant or fixed term deposit accounts
and many more currencies
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• Available in different currencies
• Competitive account service charge
Borrowing
• Cheque book
• Working capital
• Cheque deposits
• Project Finance
• R
eceiving and making domestic
and international payments • Real Estate
• A
vailable to access by • M&A finance
Internet bankingNew Landscapes of Doing Business in China 29
19
20
2) Trade finance and settlement
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Export: Import:
• L/C Advising and Confirmation • L/C Issuance
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• L/C Transfer • Back-to-Back L/C
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• Export Bills for Collection • Import Bills for Collection
• Export Bills Advance • Import Loan
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• Export Bills under L/C for Collection • Shipping Guarantee
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• Negotiation/Discount of Export Bills under L/C • Trust Receipt Facilities
• Packing Loan • Import Invoice Financing
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• Pre-shipment Financing Other:
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• Export Invoice Discounting • Guarantee/Bond/Standby L/C
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• Forfeiting
• Factoring
3) Foreign exchange
Similar to any other main currencies, all following products are available in RMB off-shore market
including Spots, Forwards, Swaps, and Options. 1
4) Internet Banking
• Easy to use
• Competitive pricing on making payments through internet banking 2
1
Forwards, Swaps, and Options are available to clients classified as Professional Clients. Please contact us to obtain further information on
these products and to understand their risks and features.
2
Please refer to Corporate Internet Banking Tariff on http://www.bankofchina.com/uk/ for more details.30 New Landscapes of Doing Business in China
Key Factors for Doing
Business in China
19
20
China is the world’s second largest Government Regulations Capital and
economy, and its phenomenal Corporate Structure
ay
growth over the last decade has The Chinese Government places
made it one of the most popular restrictions on foreign There are several types of
destinations for foreign investment in certain sectors. structural options available
investments. While there are These are itemised in its for multinational companies to
many opportunities for UK
M
Investment Catalogue. establish an enterprise in China.
investors, there are also many Investment activities are This decision is particularly
challenges to be faced when categorised into four types: crucial in the initial process of
establishing businesses in China. Encouraged, Allowed, Restricted setting up a business in China.
21
Therefore, to achieve success, or Prohibited. The catalogue
it is worth considering partnering provides specific details for all A successful company strategy
with the relevant experts. activities, with the exception of cannot be implemented without
the Allowed category – all establishing the right capital and
Below is a brief overview of some activities not specifically covered corporate structure from the
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of the factors that need to be in the catalogue are categorised outset, and poor choices may
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considered when doing business as Allowed. The catalogue is lead to restrictions on future
in China, according to professional frequently updated and, growth, difficulties in accessing
services firm Deloitte: therefore, foreign investors finance and a lack of
should review how their business flexibility.
Business Strategy proposed activities in China
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are categorised. The most common investment
It is essential to have a vehicles for foreign investors
well-developed business strategy Deloitte China has a law firm include a Joint Venture (JV).
ith
when entering China that is based within its business and is ideally Wholly Foreign-Owned Enterprise
on up-to-date and local knowledge. placed to provide legal advice to (WFOE), Representative Office,
The insights of partners and support your expansion plans. China Holding Company (CHC)
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professional advisers can be and Regional Headquarter.
critically important. Foreign
investors are advised to carry Deloitte UK and China’s tax and
out detailed feasibility and due business advisory teams have
diligence studies prior to com- worked with many multinational
mitting investment into China to companies on capital and
ensure commercial objectives can corporate structuring to ensure
be realised. that they are maximising return
on their investment in China.New Landscapes of Doing Business in China 31
19
20
Location Taxation Foreign Exchange Controls
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China is a vast country and, as China has a complex and China’s foreign exchange controls
such, there is considerable rapidly-evolving tax system. can lead to difficulties when
variation in the size and Against this backdrop, the making or receiving payments
business practices of local authorities are continuing to from China for non-resident
markets. Foreign investors are
M
strengthen the administration enterprises. It is strongly
strongly encouraged to carefully of tax in relation to non-resident recommended that business
consider the location of their enterprises. China’s tax authority receive professional advice in
operations at an early stage. has launched the value-added tax advance of entering into service
21
Local resources vary from region pilot programme. This has been contracts or remitting profits
to region, as does the quality designed to gradually replace from China, to ensure that cash
of local government assistance Chinese business tax by VAT, and does not become ‘trapped’ in
(financial or otherwise) given to decrease the overall tax burden China. Deloitte UK and China
non-resident enterprises. of tax payers. It was initially have significant experience in
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launched in Shanghai and now helping clients manage a wide
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Deloitte China has very good reaches across China. range of payments scenarios.
relationships with government
authorities across China. These It is important to understand Secondments
relationships help UK clients to the latest rules and practices to
access the support they need and reduce the risk of penalties and Non-resident enterprises will
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to understand the full range of unexpected costs. This is often second staff to China
regional benefits and incentives particularly true when during the early stages of an
that may be available. considering acquisitions, where investment to help set up their
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thorough financial and tax due business. The complexity of
diligence can identify significant secondment arrangements
liabilities and risks that could in China, however, can create
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potentially be mitigated unexpected issues and cause
through an appropriate additional costs, particularly
acquisition structure. from a tax and immigration
perspective. Significant savings
can be achieved with a properly
structured employment contract
and remuneration package, which
means the review of the
proposed secondment
arrangements by a professional
adviser is recommended.You can also read
