Ultimate guide to bank payments to China

The Global Context of Payments to China

International trade with China has expanded significantly in the past few decades, establishing the nation as one of the primary trading partners for many regions around the world. According to the World Bank, the volume of exports and imports with China has surged by over 30% in the past five years. In 2023 alone, trade between China and Latin America reached USD $489 billion.

Moreover, the China payments market is projected to grow from USD 40.27 trillion in 2024 to USD 60.24 trillion by 2029, with a compound annual growth rate (CAGR) of 8.39%. Cross-border payments using the RMB have also surged, increasing by 21.1% year-on-year in the first eight months of 2024, reaching approximately 41.6 trillion yuan (around $5.94 trillion USD). This reflects the growing global acceptance of the RMB in international trade.

RMY or CNY? Renminbi and yuan are largely used interchangeably to refer to the Chinese currency. Renminbi is the official currency, and yuan is the main unit of measurement.

Fintechs have emerged as key players in facilitating international payments. Data from 2024 shows that cross-border transactions managed by fintechs in Latin America have grown by 40% annually, and in Africa by 35%. As international trade with China continues to grow, the demand for efficient cross-border payment systems is increasing, especially as China remains the largest trading partner for over 100 countries and its economic influence continues to expand.

Payment flows to China present unique opportunities but also specific challenges.

Key Considerations: Regulatory and Legal Framework

Sending payments to China comes with a set of unique challenges, including strict regulations both in the countries of origin and in China, as well as the need to mitigate financial and operational risks.

Standard International Compliance

In 2024, companies making any international payments, including to key markets like China, must follow strict regulations to avoid penalties and ensure the legality of transactions. Know Your Customer (KYC) and Anti-Money Laundering (AML) principles, adopted globally, require companies to establish strong internal controls to identify all parties involved in each transaction. These controls are essential to avoid penalties, particularly when dealing with large-volume transfers to suppliers in China.

It is crucial for companies to implement automated systems to monitor transactions, detect suspicious activities, and ensure the traceability of payments. This is particularly relevant when transferring funds to countries with strict capital controls, like China, where irregularities can trigger investigations by both Chinese and international authorities.

Laws and Specific Requirements in China

Sending money to China involves several regulatory requirements that companies must consider to ensure that payments arrive efficiently and without issues.

Capital Control Regulations

China operates under a strict capital control system, where the inflow and outflow of foreign currencies are carefully regulated by the State Administration of Foreign Exchange (SAFE). SAFE ensures that foreign currency transactions comply with the set requirements to avoid capital outflows and ensure the stability of the yuan (CNY).

For senders, this means ensuring that the funds comply with local regulations before being accepted by Chinese financial institutions. Transactions exceeding $50,000 USD are subject to additional reviews by SAFE, which can cause delays if the proper documentation is not provided.

Regulations also require Chinese suppliers to register foreign currency inflows with SAFE, and in some cases, they must justify the origin of the funds before they can be converted into yuan. Therefore, businesses looking to send payments to China must work closely with their local partners to ensure that all documents (invoices, commercial contracts, etc.) are in order before initiating the transfer.

Sanctions and Regulatory Risks

Failing to comply with regulations when sending payments to China can not only result in significant fines but also in the loss of access to international financial services. Global sanctions are a constant concern for businesses operating in international markets. Countries like the United States, through the Office of Foreign Assets Control (OFAC), and the European Union maintain sanction lists that include Chinese entities and individuals with whom transactions are prohibited.

For companies looking to pay Chinese suppliers, it is essential to ensure that the parties involved are not on any international sanctions lists. In 2024, regulatory pressure has increased significantly, and fines for violating sanctions can exceed $50 million, depending on the severity of the violation. Fintechs and businesses handling international payments should implement automatic screening tools to check real-time sanctions lists.

Payment Methods: Optimizing International Transfers to China

When sending money to China, whether to pay suppliers or manage business operations, choosing the right payment method is critical to ensuring efficiency, minimizing costs, and avoiding delays. Businesses must carefully evaluate the available options, considering both traditional banking systems and the most advanced technological solutions. Below are two of the most commonly used payment systems, explained in detail.

Bank Transfers: SWIFT vs. CIPS

Bank transfers are one of the most common methods for sending money to China, and two main systems dominate the space: SWIFT and CIPS. Although both perform the same function, there are significant differences in terms of costs, processing times, and efficiency, which can be decisive for decision-makers.

SWIFT (Society for Worldwide Interbank Financial Telecommunication)

The SWIFT system has been the global standard for international transfers for decades, connecting more than 11,000 financial institutions in over 200 countries. Companies that wish to send money to China through SWIFT can mainly do so in US dollars (USD), although other currencies are also supported.

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Advantages:
Global coverage	SWIFT has an extensive network, making it a viable option for businesses worldwide that need to make payments to China.
Stability and security	The SWIFT system is highly regulated, providing strong protection against fraud and errors.

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Disadvantages:
High costs	SWIFT fees are usually higher, as they involve intermediaries and additional banking charges on both sides of the transaction.
Processing times	SWIFT transfers can take 2 to 5 business days, depending on the banks involved.
Complex correspondent banking chain	Each transfer may go through several intermediary banks, adding costs and delays.

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Costs: SWIFT costs include fixed fees per transaction, plus varying commissions depending on the bank, typically ranging between $25 and $50 per transfer. Additionally, intermediary banks may apply extra charges, increasing the overall transaction cost.

Recommendation: SWIFT is ideal for companies that prefer the stability and security of a globally established system, especially when handling large volumes in USD. However, if speed is a priority or if payments in yuan are preferred, it might not be the best option.

CIPS (Cross-Border Interbank Payment System)

CIPS is a relatively new system launched by China in 2015 as part of its strategy to internationalize the yuan (CNY) and reduce dependence on the SWIFT system. CIPS is designed to facilitate cross-border payments directly in Chinese yuan, offering advantages in terms of costs and processing times.

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Advantages:
Speed	CIPS allows much faster settlement than SWIFT, with the possibility of completing transfers on the same day in many cases.
Reduced costs	By eliminating intermediaries and focusing on yuan transactions, CIPS is often a more affordable option.
Facilitation of yuan payments (CNY)	Since CIPS is specifically designed for yuan, companies can benefit from avoiding foreign exchange fees.

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Disadvantages:
Limited coverage	Although CIPS is expanding, its network of participating banks is more limited than SWIFT, which may be a disadvantage for some businesses outside Asia.
Yuan dependency	Transactions through CIPS are optimized for yuan payments, which can be a disadvantage if payment in other currencies is preferred.

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Costs: CIPS fees are generally lower than SWIFT, especially if the transaction is conducted in Chinese yuan. On average, CIPS fees can be up to 30% cheaper.

Recommendation: CIPS is ideal for companies with Chinese suppliers that prefer to transact in yuan, especially when speed is crucial, and minimizing currency conversion costs is desired. While its coverage is still smaller than SWIFT, it remains a more efficient option for yuan payments.

Advantages of using fintech platforms:
Lower costs	Fintechs generally offer lower service fees compared to traditional banks.
Faster speed	Many fintech platforms can process payments within hours or by the next day, beating the timing of traditional bank transfers.
Transparency and traceability	Fintechs provide tools that allow for real-time payment tracking, giving total transparency at every stage of the process.
Ease of use	Most fintech platforms have user-friendly interfaces, making it easier to manage multiple transactions and automate processes.

Advantages:
Speed	Fedwire transfers are typically faster than SWIFT, as they allow for almost immediate settlement.
Lower costs for USD payments	By eliminating intermediaries in other countries, costs are lower compared to international transfers through non-US banks.

Disadvantages:
Limited to USD	Fedwire only works with transactions in US dollars, which can lead to additional costs if conversion to RMB is needed.
Access restrictions	Not all banks outside the US have easy access to Fedwire.

Use of Local Currencies (CNY) vs. USD: A Strategic Choice

The decision between making payments in Chinese yuan (CNY) or US dollars (USD) is a key strategic choice for companies sending money to China. Each option has its advantages and disadvantages that should be considered based on costs, speed, and currency risk.

USD Payment

Advantages:
Widely accepted	Widely accepted by Chinese suppliers and most banks. Additionally, being a global currency, it facilitates international transactions.
No immediate currency conversion	No immediate currency conversion is needed if the originating funds are also in USD, avoiding initial exchange rate risks.

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Disadvantages:
Conversion costs	USD transfers to China usually involve conversion costs, as Chinese suppliers will need to convert the dollars into yuan, which can lead to additional fees and exchange rate losses.
Longer settlement times	There may be longer settlement times due to currency conversion and bank intermediaries.

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CNY Payments

Advantages:
No supplier conversion needed	Paying directly in yuan eliminates the need for the supplier to perform a conversion, which can speed up the transaction and reduce conversion costs.
Faster payments through CIPS	CNY payments through CIPS are faster than USD payments through SWIFT.

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Disadvantages:
Exchange rate risks	Companies that mainly operate in USD must take on exchange rate risks if they decide to convert their funds into CNY before making the payment.
Limited yuan access	It may be less convenient if the company does not have direct access to yuan.

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For companies with stable and recurring relationships with suppliers in China, making payments in CNY can be more efficient and cost-effective in the long term. However, for one-time transactions or when USD liquidity is key, USD payments may offer more flexibility.

Onshore Yuan (CNY) vs. Offshore Renminbi (CNH): Key Differences for International Payments

When managing international payments to China, understanding the distinction between onshore yuan (CNY) and offshore renminbi (CNH) is essential. While both represent China's currency, they function differently due to varying regulations, trading locations, and exchange rate mechanisms. These differences can have a significant impact on how businesses structure their payment strategies.

CNY is the version of the yuan used within mainland China and is subject to strict controls by the Chinese government. It is primarily used for domestic transactions and some international trade, but its exchange rate is tightly regulated by the People’s Bank of China (PBOC). The PBOC sets a daily reference rate, and trading is only allowed to fluctuate within a 2% band of this rate. This provides stability but limits flexibility, particularly for businesses outside of China that may face additional complexities when trying to use CNY for cross-border payments.

In contrast, CNH is the offshore version of the renminbi, traded outside mainland China, mainly in Hong Kong, but also in other global financial centers. It was introduced to facilitate the internationalization of the renminbi, providing greater flexibility for global businesses and investors. Unlike CNY, the exchange rate of CNH is determined by market forces, which makes it more responsive to global economic shifts and supply-demand dynamics. This flexibility can be an advantage for companies involved in frequent or large transactions, as it allows them to take advantage of favorable market conditions without the same restrictions seen with CNY.

One of the most important distinctions lies in the trading restrictions imposed on each. CNY is heavily regulated, and individuals or companies within China are limited to $50,000 USD equivalent per day in foreign exchange transactions. This cap is designed to manage capital outflows and protect China’s currency reserves. For businesses engaging in high-volume or frequent international transactions, this restriction can slow down the payment process or require additional planning.

On the other hand, CNH is freely tradable without the stringent controls that apply to CNY. Companies and individuals can trade CNH without restrictions, making it a more versatile option for international payments. This freedom enables faster and more efficient transactions, especially for businesses with global supply chains or frequent dealings with Chinese partners. For international companies, the ability to move funds more freely in CNH can significantly reduce delays and operational hurdles.

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Regulatory oversight further separates the two currencies. CNY is tightly managed by the PBOC and the State Administration of Foreign Exchange (SAFE), ensuring that capital controls are enforced and that domestic financial stability is maintained. CNH, however, is regulated by the offshore markets where it is traded, such as the Hong Kong Monetary Authority (HKMA), giving it more regulatory flexibility.
Despite these differences, both CNY and CNH are pegged at a 1:1 ratio, but due to different market conditions, they may trade at slightly different rates. For businesses, this means that payments made in CNH may sometimes be more cost-effective or timely than those made in CNY, depending on market fluctuations.

Operating with CNH: Key Considerations for Businesses

For businesses managing cross-border payments with China, CNH offers flexibility and fewer regulatory restrictions compared to CNY. To maximize the benefits of using CNH, consider the following points:

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Leverage Offshore Markets

CNH is primarily traded in offshore financial hubs like Hong Kong, London, and Singapore. Working with established institutions in these markets ensures access to better liquidity, competitive exchange rates, and faster settlements, helping businesses optimize their international transactions.

Manage Currency Risk

Since CNH operates under market-driven rates, its value can fluctuate. Companies dealing with high volumes should consider hedging or using forward contracts to protect against exchange rate volatility, ensuring predictable transaction costs.

Utilize Fintech Solutions

Fintech platforms provide direct access to CNH, offering real-time rates and quicker processing times compared to traditional banks. These solutions can streamline payments, reduce costs, and enhance operational efficiency.

Ensure Regulatory Compliance

Even though CNH is less regulated than CNY, businesses must still comply with local regulations in offshore markets. Key financial hubs like Hong Kong maintain strict oversight, so staying compliant is essential for smooth operations.

Integrate CNH into Treasury Management

For companies with recurring payments to China, opening CNH accounts can reduce conversion costs and improve cash flow. This strategy simplifies cross-border payments and strengthens overall liquidity management.

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Challenges and Solutions for Sending Payments to China

Making payments to China involves a set of unique challenges due to the nature of the financial market, local regulations, and differences in banking infrastructure.

Currency Conversion and Volatility

One of the biggest risks when making international payments to China is currency volatility. Fluctuations in exchange rates can significantly impact the final cost of a transaction, especially for large-volume operations. This risk is particularly relevant for companies making payments in US dollars (USD) when their suppliers require payments in Chinese yuan (CNY).

Solutions to Minimize Currency Volatility:

Forward Contracts: One of the most common tools to mitigate exchange rate risk is using forward contracts. These contracts allow companies to lock in an exchange rate for a future date, ensuring that the transaction cost does not change regardless of market fluctuations. This solution is especially useful for recurring or large-scale payments.
Currency Hedging: Fintechs can also offer hedging services to mitigate exchange rate risk. By purchasing financial derivative products, such as currency options, companies can protect themselves against adverse movements in exchange rates.
Payments in CNY via CIPS: If USD volatility is a concern, one option is to make payments directly in yuan through the CIPS system. This eliminates the need for additional conversions and reduces the impact of exchange rate fluctuations between USD and CNY.

Banking and Infrastructure Challenges

Despite technological advances, international bank transfers still face infrastructure and process issues that can result in delays, additional costs, and processing errors. In the context of payments to China, where the financial system is highly regulated, companies may encounter obstacles such as delays in fund settlement or unexpected charges from intermediary banks.

Strategies to Overcome Banking Challenges:

Use of Local Intermediaries or Banks Experienced in China: By working with banks that have experience in processing international payments to China, companies can reduce transaction friction. Banks with established networks in China can facilitate fund transfers and minimize the need for intermediaries, which add costs and time to the operation.
Specialized Fintech Platforms: Fintechs that offer cross-border payment solutions can overcome these challenges by providing faster and more cost-effective platforms than traditional banking systems. These platforms are designed to handle payments to international markets with fewer intermediaries and greater transparency in costs.
Exchange Rate Optimization: Some fintechs also offer solutions that allow companies to lock in favorable exchange rates at the start of a transaction, avoiding hidden fees or fluctuations during the payment process.

Regulatory Changes in China

China has a dynamic regulatory environment, and the rules governing international payments can change quickly. Chinese authorities often adjust regulations to control capital flow and protect the local economy.

Stay updated on regulatory changes by collaborating with local partners and fintechs specialized in China. These companies are often better equipped to adapt quickly to new regulations.

Settlement Times

The time it takes to complete a transaction is a key factor for companies sending payments to China, especially when paying suppliers to ensure contract compliance or avoid supply chain disruptions. Settlement times vary depending on the method used and the payment infrastructure.

The Future of Payments to China: Trends and Opportunities

As global trade continues to digitalize, cross-border payments are undergoing a radical transformation.

The Role of Fintechs in Modernizing the Ecosystem

Fintechs are leading the transformation of international payments, providing solutions that are more flexible, faster, and more transparent than those offered by traditional banks. These companies are not only facilitating global payments but also creating a new financial ecosystem where transactions are more accessible and less expensive.

Opportunities for LATAM and Africa in Payment Digitalization to China

The growing digitalization in Latin America and Africa offers significant opportunities for companies that need to send payments to China. Leveraging cutting-edge technologies and partnering with fintechs can:

Reduce operational costs.
Improve operational efficiency.
Increase global competitiveness for businesses in both regions.

Discover how Conduit can simplify your international payments to China. Contact us to learn more about our platform and how we can support your business.