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Blog Top 4 Alternatives to Opening an Offshore Bank Account for Hong Kong Companies

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Top 4 Alternatives to Opening an Offshore Bank Account for Hong Kong Companies

by Angel Ho | 10 March 2020

Piggy banks on an island

Considering the territorial advantages of Hong Kong, it comes as no surprise that the majority of WFOE owners choose to open a Hong Kong corporate bank account. This enables them to freely transfer money overseas, without worrying about restrictions on exchange currencies as applied in Mainland China. 

But these days, the situation is much stricter. It’s no secret that it remains difficult for foreign-invested companies to open a business bank account in Hong Kong. Due to anti-fraud measures brought in after 2012, which affected HSBC among others, Hong Kong banks have increased their due diligence to levels where companies have found it really difficult to open an account. 

It’s obviously more convenient having a bank in the same jurisdiction as your business. But is a Hong Kong bank account your only option? Not necessarily! If you are one of the many foreign companies that have either failed to obtain a business account in Hong Kong or are looking for alternative options, this is the blog post for you! 

Top Foreign Exchange Accounts for your business: 

These accounts are foreign exchange accounts, available to any foreign entity (including a WFOE). It's important to note that these accounts are different from a RMB account, which not every foreign entity can open. 

1. Offshore account (OSA) in Shenzhen

The first on our list is opening an offshore account in Shenzhen. Some banks in Shenzhen now offer accounts that can perform foreign currency transfers for Hong Kong companies. In theory, if you have a Hong Kong company but have not yet been able to open an account there, this account can work for you.

Why open an OSA in Shenzhen? 

  • Similar to a Hong Kong corporate account, this type of account is not controlled by SAFE (State Administration of Foreign Exchange). This means that it can be used to transfer foreign currency such as USD, EURO or GBP to other overseas accounts. 
  • There is no limit to the amount of money you can transfer, and you can even transfer unlimited amounts to mainland accounts freely. 
  • OSA has a variety of different functions such as deposits, loans, settlements, and financing.
  • Telephone banking, fax banking and online banking services are available. 
  • There is also 24-hour phone support for the Shenzhen Bank Account Opening Service, which you can find contact information for here

What are the major drawbacks to this account?

  • It is estimated that your annual revenue should be approximately US$15 million. While this is an approximate figure, it clearly shows that opening such an account is unlikely for a small to medium enterprise. 
  • Only 4 banks in Shenzhen offer accounts that can perform foreign currency transfers for Hong Kong companies: 
    • China Merchants Bank
    • China Bank of Communication
    • Pudong Development Bank
    • Ping An Bank
  • It doesn’t deal with RMB at all.
  • Directly withdrawing money is unavailable. 

 

2. Non-resident account (NRA) in China

One of the options for opening an ‘offshore’ bank account in China is opening a non-resident account (NRA). In terms of who is eligible for an NRA account, applicants must be established as a foreign company (WFOE) as well as having office premises in China. 

Why open an NRA account? 

  • The NRA is available for foreigners in every bank based in Mainland China.
  • NRA accounts can be opened in either RMB or foreign exchange currency. 
  • Provides a simple procedure of settlement and increased efficiency.
  • To handle settlement via a RMB NRA account, your business can help customers to avoid the risk regarding exchange rates efficiently and guarantee their corporate income. 
  • Telephone banking, fax banking and online banking services are available. 

What are the major drawbacks to this account?

  • NRA is strictly regulated by China SAFE, meaning that there is more stringent government control.
  • Directly withdrawing money is unavailable.

 

OSA vs NRA

One of the most common questions we get is 'what separates the OSA and NRA from each other?'. Both accounts do share a wide range of similarities, so what makes them different? 

Firstly, an NRA is available for foreigners in every single bank based in Mainland China, whether it is domestic or foreign. Whereas an OSA can only be approved by the following four banks that have been authorized to do so: 

  • China Merchants Bank 
  • China Bank of Communication
  • Pudong Development Bank 
  • Ping’an Bank

Also, the NRA is strictly regulated by China SAFE, meaning that there is more stringent government control. On the other hand, OSA is administered by the China Banking Regulatory Commission and is less strict in terms of exchange and government controls.

Below is a table highlighting some of the main differences of an OSA and NRA:

  NRA OSA
Eligibility A bank account opened in China by an institution legally registered abroad (including Hong Kong, Macao and Taiwan). A bank account opened outside of the depositor resident country.
Banks Available for foreigners in every bank based in Mainland China. Available to the 4 listed banks: 
  • China Merchants Bank 
  • China Bank of Communication
  • Pudong Development Bank 
  • Ping’an Bank
Regulated By: 

State Administration of Foreign Exchange (SAFE)
Stringent government control.

China Banking Regulatory Commission
(CBRC) 
Less stringent government control. Funds are free to enter and leave.

Core Benefits

RMB account is available, and its benefits are:

  1. Saving enterprise cost for currency exchange;
  2. Simple procedure of exporting business and tax return;
  3. Avoid risk of exchange rate and improve enterprise income.

OSA has following advantages:

  1. Free capital transfer;
  2. Flexible deposit interest and types;
  3. No deposit interest tax;
  4. High efficiency of capital operation;
  5. Domestic manipulate and overseas operation.


3. FTN (Free Trade Non-resident) account in Hainan China

A free trade non-resident (FTN) account in Hainan can only be opened by overseas companies in financial institutions in Hainan or Shanghai free trade zone in China. Making use of the unique financial infrastructure of the Hainan Free Trade Zone, the account gives you access to more convenient investing and currency exchange making the global financial markets more accessible.

Why open an FTN account? 

  • You do not have to apply in person - Shareholders and Directors are not required to be at the bank in person to open this account. With video authentication, your account will be ready in 10 working days. Telephone banking, fax banking and online banking services are also available. Most banks in Hainan free trade zone offer English services, and we also provide bank account management service in Hainan. 
  • Free Flow of Capital - With this account, you can freely remit RMB to China without having a corporate entity in the country. Additionally, if you have a Chinese company, you can receive RMB without having to report to SAFE. 
  • RMB Auto-Settlement - With FT account, you can transfer in foreign currency to the companies in China and they will receive payments in RMB automatically. You also don’t need an entity in China.
  • Multi-currency account - An FTN account combines domestic and foreign currency and accommodates any special FT accounting arrangements. While RMB serves as the main currency for the account, various foreign currencies can be managed through sub-accounts. Therefore, your company saves time, money and the trouble of opening multiple accounts for different currencies. 

What are the drawbacks to this account?

  • The biggest limitation is that this account can only be opened by overseas companies in financial institutions in Hainan or Shanghai free trade zone in China. 

If you wish to learn more about the necessary steps and documents required for opening an FTN account, check out our blog post which highlights everything you need to know about opening an FTN account in Hainan Free Trade Zone as a Foreign Investor

 

4. Offshore account in Singapore 

Opening an offshore bank account in Singapore is also a viable option for your WFOE. As a leading global financial centre, Singapore has some of the best offshore banks in Asia, offering top-level banking infrastructure to support international business. 

Why open an offshore account in Singapore? 

  • Singaporean banks (DBS Bank, OCBC Bank and UOB Bank) are ranked the top in Asia. It is one of the world’s largest financial centres with an incredibly stable economy.
  • Singapore has no foreign exchange controls – this enables free exchange between different currencies. 
  • Banks in Singapore do not require large initial deposits – the minimum deposit required to open an account is relatively low at about US$730). 

What are the drawbacks to this account?

  • You will be required to go there to open an account. Banking regulations do not permit the opening of accounts by mail. 

Which option should I choose? 

As a WFOE, you are not just limited to opening a Hong Kong corporate bank account. There are so many more options available to you! When deciding which option is best for your business, some of the critical questions you should consider is how much money you want to deposit and if you meet the requirements. 

 

A summary of the information discussed in the blog can be found in our table below.

Account Opening Company Regulating Department Function Banks that can provide the services
Non-Resident Account (NRA) Non-resident Enterprise/ Offshore Company State Administration of Foreign Exchange (SAFE) No Foreign Exchange Control Most of the banks
Offshore Account (OFA) Non-resident Enterprise/ Offshore Company China Banking Regulatory Commission (CBRC) No Foreign Exchange Control China Merchants Bank, Shanghai Pudong Development Bank, Bank of Communications and Ping An Bank
FTN, FTA Offshore/ Domestic Company State Administration of Foreign Exchange (SAFE) RMB settlement Banks in Shanghai and Hainan
Basic Account Resident Enterprise/ Domestic Company

China Banking Regulatory Commission (CBRC)

Settlement and Withdrawal

Most of the banks

Capital Account Resident Enterprise/ Domestic Company

China Banking Regulatory Commission (CBRC)

Limited to inward remittance of capital

Most of the banks

Foreign Exchange Settlement Account Resident Enterprise/ Domestic Company

China Banking Regulatory Commission (CBRC)

No withdrawal

Most of the banks

 

If you are considering opening any of the above accounts for your foreign business, at Hongda, we can guide and assist you in preparing your account opening documents and filling out application forms – significantly reducing the time you spend on preparation and allowing you to focus on your business without any distractions. Contact Hongda now and get the best solution for you and your business.


Hongda consultation CTA 2016

Topics: WFOE, Doing Business in Hong Kong, Doing Business in China, Hainan Free Zone

Angel Ho

Angel Ho

Helping make China companies easy for foreign investors since 2007 as lead consult.

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