In this blog, Hongda will cover the most frequently asked questions about carrying out exporting business with a company in China. Companies already doing business in China might learn a lot, but the suggestions and insights are also efficient for anyone considering entering the Chinese market.
Hongda is happy to present our new blog series: Top 10 Q&As! In this blog section, we would like to further illustrate to our foreign customers how to deal with matters of business, work, financials, and taxes in China. In each issue, we will summarize the top ten questions and provide detailed answers to the difficulties you may face! In this blog post, we will provide the top ten FAQs about operating a business in China. Also, if you are interested in our other blogs in this series, please click on the titles under here for access to them!
- Most Questions Asked About Chinese Working Visa
- Common Q&As About Doing Business in Hong Kong
- Top 10 Q&As About Doing Business in China
Conducting import and export trade business in China is a complex topic that involves various aspects such as company registration, financial settlement, and store management. In order to provide you with as much information as possible about China’s import and export trade, we have broken down and categorized the most frequently asked questions we receive. In our previous blog post, we focused on the basic background knowledge and how you can leverage Free Trade Zones to enhance your business advantages. And in this section 2, we will inform you about payment and international settlement. Let's start!
Question 1: How Should I Handle RMB Settlement Under China’s Foreign Exchange Controls?
Despite foreign exchange controls in China, businesses can effectively manage RMB settlements through compliance and the use of appropriate tools and strategies.
1. Ensure Legitimate Sources of Income
All RMB settlement funds must have a legal origin and be supported by proper documentation, such as commercial contracts, invoices, or bank transaction records. These documents validate the legality of the transactions and ensure compliance with regulations.
2. Comply with Currency Conversion Regulations
If foreign exchange needs to be converted into RMB, it must be done through a bank or financial institution authorized by the government. You need to provide genuine transaction proof, such as invoices or contract and ensure compliance with the State Administration of Foreign Exchange (SAFE) regulations.
3. Maintain Separate Accounts for Different Currencies
To enhance financial efficiency and clarity, it’s recommended to maintain dual accounts: foreign currency account for receiving and disbursing foreign exchange, and RMB account for domestic operations and settlement. This approach avoids confusion, ensures proper currency management, and provides flexibility in timing currency conversion for operational needs.
4. Optimize Settlement Tools
- You can choose to leverage the following tools and platforms to streamline settlement processes:
- Cross-border E-commerce Platforms: Platforms like Alibaba International allow seamless RMB settlement for Chinese sellers while enabling buyers to use their preferred currencies.
- International Payment Tools: Integrating platforms like Payoneer with Chinese payment systems supports cross-currency transactions.
- 1039 Procurement Model: Designed for small and medium-sized trade businesses, it facilitates quick and efficient RMB payments for cross-border transactions.
5. Utilize Free Trade Zone Policies
- China’s free trade zones (FTZs) offer more flexible policies for cross-border RMB settlements. Key benefits include:
- Simplified Currency Conversion: Support for free conversion between RMB and foreign currencies.
- Reduced Exchange Rate Risks: Direct RMB settlement minimizes exposure to exchange rate fluctuations.
- FTZs also provide policy incentives tailored to specific industries, making them ideal for businesses seeking growth opportunities in China. For more details, explore our "City Series" blogs to understand the unique advantages of each FTZ.
Useful links:
- Investment in Hainan
- Investment in Shanghai
- Investment in Guangzhou
- Investment in Shenzhen
- Investment in Beijing
Question 2: What Are the Major E-commerce Platforms in China?
Thanks to China’s robust infrastructure and logistics network, e-commerce platforms have expanded significantly in recent years. For many consumers, these platforms are the primary choice when shopping online. The following are the main e-commerce platforms in China:
1. Tmall (天猫)
Tmall is a comprehensive e-commerce platform that brings together numerous well-known domestic and international brands. The platform mainly operates through brand-owned stores, making it particularly appealing to mid-to-high-end consumers. Tmall is highly beneficial for brands looking to promote their products independently and build brand recognition in the Chinese market.
2. JD.com (京东)
JD.com is known for its efficient logistics and product authenticity guarantee. It primarily focuses on categories such as 3C products (computers, communications, consumer electronics), home appliances, and more. JD.com’s self-built logistics network ensures fast delivery, with many cities offering “next-day delivery” services. The platform also provides bulk procurement services, making it ideal for businesses targeting efficiency-driven consumers and corporate clients.
3. Pinduoduo (拼多多)
Pinduoduo is an e-commerce platform that emphasizes group buying and low-cost products. It leverages social sharing models to encourage consumers to participate in “group buying” for discounts. Pinduoduo is particularly popular in lower-tier cities and rural areas, where price-sensitive consumers are more common. It’s an effective platform for businesses aiming to reach China's “lower-tier” markets quickly.
4. Taobao (淘宝)
Taobao is a C2C (consumer-to-consumer) platform with a wide range of product categories, and it allows small businesses and individual sellers to set up shops. Though both Taobao and Tmall are part of Alibaba Group, Taobao is more friendly to small and medium-sized businesses, offering low startup costs. It’s an ideal platform for testing new products or markets.
5. Douyin E-commerce (抖音电商)
Douyin E-commerce is an innovative platform built around the short-video and live-streaming traffic generated by Douyin (the Chinese version of TikTok). The platform attracts users through engaging content and interactive experiences, making it particularly effective for promoting emerging brands and fast-moving consumer goods (such as cosmetics and fashion). Douyin’s user base is predominantly young, which makes it an ideal platform for businesses aiming to increase brand awareness and engage in rapid community-driven promotion.
6. Xiaohongshu (小红书)
Xiaohongshu is a community-based e-commerce platform where users share shopping experiences and lifestyle content. The platform focuses on categories such as fashion, beauty, skincare, and premium luxury goods. Xiaohongshu is perfect for businesses looking to create a strong brand image and target younger consumers who value quality and an aspirational lifestyle.
Question 3: What Are the Common and Reliable Online Settlement Methods for Businesses in China?
For both domestic consumers and foreign businesses operating in China, various online payment platforms are widely used. These platforms are essential tools for conducting online transactions and settling payments in China.
1. Alipay (支付宝)
Alipay is commonly used for B2C transactions and small payments, making it ideal for daily life expenses. It is especially useful for retailers, e-commerce businesses, and businesses with direct customer interactions. Alipay also offers the ability to set up mini-programs and promotional accounts, enabling businesses to promote products and facilitate direct online purchases.
2. WeChat Pay
Similar to Alipay, WeChat Pay is used for personal payments and small business transactions. Its seamless integration with WeChat’s public accounts and mini-programs makes it a great choice for businesses that need to combine online and offline services. WeChat Pay is especially popular in industries like e-commerce, dining, and entertainment.
3. UnionPay Online and Bank Transfers
This traditional online payment and transfer method relies on the banking system for fund settlement. UnionPay Online and bank transfers are known for their higher security and reliability compared to Alipay and WeChat Pay. These methods are ideal for large orders or transactions between businesses, particularly in government projects and public services.
These online payment methods are commonly used by businesses in China and can also support cross-border payments. In addition, several other cross-border payment methods are widely used by businesses in China:
1. PayPal
PayPal is a globally recognized online payment platform that supports multi-currency transactions. It is particularly popular among foreign trade companies and service exporters, making it ideal for businesses that frequently transact with international clients.
2. SWIFT International Transfers
SWIFT is a global network for large cross-border payments, offering wide coverage and ensuring transparent, compliant fund flows. It is suitable for international trade, large-scale service procurement, and long-term project payments, providing reliable cross-border payment support for businesses.
3. Multi-currency Bank Accounts
Foreign trade businesses can open multi-currency accounts with domestic banks to receive and make payments in various currencies. These accounts help reduce currency fluctuation risks and improve financial management efficiency. Multi-currency accounts are especially useful for international businesses that handle cross-border transactions in multiple currencies.
Question 4: Can Foreign Enterprises Manage Import and Export Operations Remotely in China? What Are the Suitable HR Solutions?
China allows foreign enterprises to handle import and export operations remotely through authorized agents, e-commerce platforms, or specialized third-party service providers. Foreign companies are not required to set up branches or station staff in China to manage most of their operations. By utilizing online customs management systems (like China’s National Single Window for International Trade) and remote ERP systems, you can easily monitor and manage cross-border business operations. Additionally, you can opt for professional agencies like Hongda or other service providers to handle on-the-ground tasks locally.
To manage import and export operations remotely more efficiently, effective human resource (HR) solutions are essential. Hiring local employees offers several advantages, including familiarity with the market and legal regulations, which can help address operational issues more efficiently. Additionally, you can use flexible employment models such as outsourcing or part-time work to reduce long-term labor costs.
If you need HR services, Hongda offers tailored HR solutions to help you achieve satisfactory results with minimal personnel costs:
- Employer of Record (EOR) Services: Hongda offers an EOR service model, allowing legal employment while avoiding the complexity of establishing a local entity. Hongda can draft labor contracts for you.
- HR Legal Consulting: Hongda provides professional legal consulting services, including contract drafting, labor dispute resolution, and more.
If you haven't read our previous blog about the fundamental knowledge to expand your international trading business in China, you can simply click the link below for the useful post!
Top Questions Asked About Product Exporting in China - Section 1
