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Example: China (payments)

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Credit information

Annual accounts are seldom available. However, there are a number of credit agencies (such as Bank of China) which can supply basic details of the companies in question. For detailed credit information, the approval of the company is still required. Basic information can be supplied in about ten days.

Currency restrictions

The Chinese currency CNY is not fully convertible. The Chinese buyers are allowed to purchase foreign currency freely in current account items but it has to be supported by real transactions. All import transactions are subject to approval from State Administration of Foreign Exchange (SAFE).

Invoicing can also be done in CNY in trade with China. When exporting to China and invoicing is done in CNY, the Chinese trade party must be registered with the Central Bank (People's Bank of China). Since 2010 payment in CNY for exports / import is expanded to cover all overseas countries/regions and piloted in 20 provinces/municipalities in China and is permitted for trading of goods and services and other items under current account.

Payment in CNH (China Offshore Spot) is allowed for export / import of goods and services. Contact your bank for details.

Forms of payment

Clean payment

Clean payment is a used method, however there may be risk for payment delays. Cash discounts are not applicable.

15% of the total value as advance payment is a common practice. If the advance payment is more than 15% or the single advance payment amount exceeds 100.000USD the transaction require approval from SAFE. An advance payment guarantee issued by a Swedish bank is also required.

The Chinese buyer will need a proforma invoice and the purchase contract in order to conduct the advance payment regardless of the amount.

Documentary Collection

Increasingly used especially in the coastal provinces. Payment delays may occur.

Letter of credit

Recommended and preferably confirmed. (Often silent confirmation). The risk fee on China is relatively low and with a confirmed L/C the risk is covered quite well.  L/Cs are also used to a small extent among the new small commercial banks. Make sure to check the bank with your Swedish bank before isuing a L/C.

At sight L/Cs predominate. Payment terms over 90 days are rare as they require approval from SAFE. L/Cs on China are often payable in China. Payment is made within seven to fifteen days after document presentation in China. Payment outside of China is accepted if the goods are of particularly high demand. Check the L/C against the commercial contract/quotation to ensure that they agree.

China has adopted the ICC rules. Check that the L/C text is in line with LCC rules.

Penalty interest

The penalty interest is becoming more and more frequently used in Chinese sales contract. Usually the company penalty interest is 0,1 - 0,5% per day overdue. Penalty interest must be specified in the sales contract.


Direct O/D guarantees are commonly used. URDG 758 is acceptable.

It is preferable to accept a Letter of Credit rather than payment guarantee for covering the credit risk. 

Bill of exchange

Commonly used in domestic trade but not in international trade.

The EKN Country Policy

June 2017: Premium class 2.

 See also under risk and riskcoverage - EKN.

Credit insurance companies

Atradius Open.

Euler Hermes Sverige  Open.

Other forms of security

There is also a law on collateral. However, the process of registering and perfecting the collateral is complex and decentralised. There is no central register.

Legal action

Reminder and collection procedures

There are no collection procedures. Statute of limitation is 2 years.

Enforcement measures

Enforcement of private law judgments:

No agreement exists between Sweden and China regarding the enforcement of private law judgments.

China introduced a modernized bankruptcy law in 2007 but The Bankruptcy Institute is used relatively infrequently, and foreign creditors opportunities to win the case is uncertain.

Enforcement of arbitration awards:

China is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.

See the description in the section Legal action.


China is a member of the WTO, ADB, IMF, IBRD and IFC

Several local and foreign banks now have a license to handle import/export business.

For exports of equipment that is to be installed, about 10% of the purchase price is normally retained, which is normally released once the buyer has signed an acceptance record. You should therefore always make sure that this part of the payment is secured via an L/C or under a separate guarantee.

When selling from a foreign company to a Chinese company and the goods are produced in China there is no possibility to effect overseas payment due to Chinese foreign exchange control. Without import documents (Customs clearance documents) the buyer can not make payments overseas.

Many foreign companies with production as well as sale in China establish WOFE (Wholly Owned Foreign Enterprises) or FICE (Foreign Invested Commercial Enterprise). The transaction is made between the subsidiary and the Chinese buyer and the subsidiary can transfer overseas payment to the mother company abroad.

When exporting services to China, 6% of the invoice value is withdrawn as "Value Added Tax" paid by the Chinese buyer. There is also  "Witholding Corporate Income Tax (CIT)" which is calculated as 25% of the deemed profit (deemed profit is a rate decided by the Tax office and range between 15 % to 50% of the invoice value). It is wise to have this in mind during price negotiation. Usually the Witholding CIT is borne by the Swedish company due to the fact that the Swedish company can deduct the CIT as stated in Trade regulations between China and Sweden. 

All in all, rules and regulations related to foreign exchange and taxes do often change.

Some Chinese companies may request payment into an employee's private account for the company to avoid tax. This violates the Chinese law. A serious Chinese company should have an account that can receive money from abroad.

The former British crown colony of Hong Kong belongs to China since 1 July 1997. Though Hong Kong  is a city of China, trade between Hong Kong and the mainland is still regarded as international trade. We report Hong Kong in a separate section.