Business payments being made to China is on an upward trend and it is aligned with the country's emergence as a global economic powerhouse in recent years, reshaping the dynamics of international trade and becoming a driving force behind the success of numerous businesses worldwide. Even though it is still considered as an emerging market, the sheer scale and potential of China's market have drawn the attention of entrepreneurs and corporations seeking unprecedented growth opportunities. Paying into China has proven to be a strategic necessity that spells success for businesses, regardless of their size or industry.
With a population exceeding 1.4 billion people and a rapidly expanding middle class, China offers an enormous consumer market hungry for products and services. The rising disposable incomes and evolving consumer preferences of Chinese consumers present a vast untapped potential for businesses looking to expand their reach and increase revenue. Moreover, China's market is not limited to domestic consumption; it is also a gateway to global trade and connectivity.
Beyond its vast consumer market, China boasts a reputation as the world's manufacturing hub. The country's manufacturing capabilities, cost-effectiveness, and efficient supply chains have made it an attractive destination for businesses seeking to optimise production and reduce costs. From electronics to textiles, automotive to pharmaceuticals, companies across industries have found value in leveraging China's manufacturing expertise.
China's role in global trade and connectivity cannot be underestimated. The country actively participates in initiatives like the Belt and Road Initiative, enhancing infrastructure and trade linkages across Asia, Europe, and Africa. Businesses paying into China can leverage its strategic geographic position and connectivity to access new markets, forge international partnerships, and expand their global footprint.
China's B2B Spending
Based on a McKinsey & Company report titled "Five consumer trends shaping the next decade of growth in China", with its impressive economic might, China stands as the global leader in consumer spending, wielding its power as the largest consumer economy in the world when measured by purchasing power parity (PPP). Moreover, it dominates the realm of e-commerce, claiming the title of the world's largest market in this sector by a considerable margin. In 2020 alone, China's e-commerce sales reached a staggering US$1.3 trillion, and projections indicate that this figure is set to soar to nearly US$2 trillion by the year 2025.
Adding to the country's economic prowess, over 235 million Chinese customers are actively engaged in purchasing products through cross-border e-commerce channels. This number continues to rise steadily each year, indicating the growing appetite and trust of Chinese consumers in cross-border trade opportunities. As China's e-commerce ecosystem evolves, businesses can anticipate a burgeoning customer base and increased demand for cross-border products and services.
China's commitment to opening up its cross-border payments market and promoting the usage of the RMB is set to intensify. In the first quarter of 2022, the cross-border utilization of the RMB reached an impressive 9.7 trillion yuan (equivalent to US$1.45 trillion), marking an 8% increase compared to the previous year, as reported by China's central bank.
To facilitate this growth, Chinese authorities are actively encouraging foreign B2B trade companies involved in imports to opt for RMB as their preferred payment currency. Additionally, recipients of China's Belt and Road loans are also being encouraged to borrow in RMB. These initiatives not only enhance the global recognition and acceptance of the RMB but also foster stronger economic ties and streamlined financial transactions between China and its international trading partners.
Challenges with cross-border payments into China
Here are some key challenges for making payments to China for businesses around the world:
1. Upon registration and approval by the State Administration of Foreign Exchange (SAFE), Chinese suppliers are required to comply with documentation procedures set by the regulatory authority. Whenever they receive funds from overseas sources, it is mandatory for Chinese suppliers to submit the required documentation to SAFE within five days of receiving the funds.
2. Point-of-sale payment acceptance is in the customer’s currency of choice, but suppliers want payment in local currency.
3. There is no onshore local currency account from which to remit funds in CNY.
Solving the challenges with SUNRATE
As an intelligent global payment and treasury management platform, SUNRATE makes business payments into China easy with our networks. When businesses send payments to Chinese suppliers, they are able to access our competitive exchange rate and fees. Most importantly, payments into China will be settled on the same day with a convenient cut off time (as late as 18:30 gmt+8).
To find out more about how you can start paying chinese suppliers, connect with us today.
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