China - moving of the cash

Beijing a proper business in China is connected with various challenges. Lets focus on finance, how to move the money inside and outside of the country and what expectation might the government impose:

1. Equity .... after the registration of the company it is essential to register total amount of investment. Most of the SMEs and MMEs rules will apply to 70/30 ratio, where 70% shall be incoming as an equity. Once registered money could be send to China from outside. Please be informed, that sending CNH to China is connected with issues, as government controlled banks are keen to collect foreign currency. Therefore u would need your USDs or EUROs to be transferred and than pau the price of changing them to local currency. Expect to loose up to 5%, if you dont negotiate the rate upfront.

2. Loan .... Intracompany loan, set by registration making 30% of total investment is additional way how to pump in the money. By the loan it is expected to transfer to equity once the company did spend all the equity and still is in loss or in other case to be transferred back to origin aftet the equity prooves to be sufficient and there is no additional cash need on investments or working capital. It is possible to charge interest on such a loan and this interest shall be lower than commercial rate due to intracompany status and still higher than deposit rate in China, currently around 4%. It may be imposed withdrawal tax on such a downpayment in amount of 10%

3. Cash sweep .... a product introduced in various parts of China to help international companies to move money more free in and outside of China. Few rules need to be applied and still it will more freely move the cash.

4. SBLC .... long term financing inside China trough bank financing. This way the daughter company doesnt suffer by sending money back to origin, as they were never send to China at first.

5. Trading .... having a reasonable product or service to be purchased outside of China. This could be limited, as the price needs to be transparent and it might always be unpredictable how the local bank reacts

6. Agency scheme .... very hard to use, as it is unpredictable and usually expensive. Also acxoutingwise very challenging.