European small and medium-sized enterprises exporting goods and services to China often raise questions about payment options, conditions, and procedures related to payment. Among their main concerns are how to assess the financial credibility of the buyer or importer in China and how to minimise risks of delayed payment or no payment. SMEs tend to be unfamiliar with local bank products and services, as well as with the fragmentation of the Chinese banking system and its position within the international banking system. Foreign exchange control procedures can be difficult to understand and time-consuming, raising questions on the average time needed for the completion of a payment.
Our new guidelines aim to provide EU SME exporters with reliable information to navigate international trade payments, when exporting goods and services to China. Although many obligations in relation to payment lie with the importer or buyer in China, we include an explanation of these obligations and process in order for the EU exporter to understand the complexity of overseas payments from China, and not be misled by arguments from the Chinese party if it insists on better conditions for its side (e.g. more advantageous payment methods), if it delays payment or fails to pay.
What you will find in these guidelines
In these guidelines, exporters will find detailed explanations on the different payment options available to them, the documentation required and the risk level of each. They will also find illustrations of typical cross-border payment scenarios on the trade of goods and services between European companies and Chinese partners. The cases highlight common risks and demonstrate best practices to mitigate them. Finally, the appendices provide detailed references, including a list of designated banks, key regulations, and a flowchart on service contract registration and tax procedures.
Doing business with China demands an understanding of its payment and banking landscape. Payment in RMB has become increasingly common. This report compares settlement in RMB versus foreign currency and explains how foreign companies can receive and use RMB. It also clarifies whether RMB can be paid under contracts that specify a foreign currency. By preparing for regulatory compliance and choosing appropriate payment methods, foreign companies can reduce delays and improve financial efficiency.
