3 Mistakes Corporations Should Avoid With International Payments To China

International payments are necessary for corporations to make their payments abroad, but having certain mistakes along the way can ultimately end up costing you a lot of money, time, and resources.

As many might know, China is one of the main countries generating rapid growth as a destination for international payments. Its significant exports end up “contributing $65 billion, or 87 percent of total regional revenues” according to McKinsey & Company.

In case your business is one of the many making international payments to China, let’s dive into some possible mistakes you should avoid at all costs. 

1. Not knowing there's onshore and offshore delivery for international payments to China

The Chinese yuan (Renminbi) is managed as a floating currency with reference to a basket of undisclosed currencies by the Peoples Bank of China (PBOC).

CNH is the offshore trading format of Renminbi. To promote cross-border trade flows, PBOC allows qualified transactions to be executed either at the interbank CNH rate or at the onshore CNY rate.

2. Getting International Payment Information Details Wrong 

With the constant demand that comes along with recurring international payments, it’s easy to miss some of the most important details. Here are the two different types of international payment requirements you will need for offshore and onshore delivery.

• For offshore delivery international payment instructions must include:

1. Full name and address of remitter
2. Beneficiary bank SWIFT BIC, name & address
3. Full beneficiary name, address, account number, phone number
4. Additional info: Purpose of Payment

• For onshore delivery international payment instructions must include:

1. Full name and address of remitter
2. Beneficiary bank CNAPS (China National Advanced Payment System code), name & address
3. Full beneficiary name*, address, account number, phone number
4. *Note: Beneficiary must be a corporation
5. Additional info: Purpose of Payment 

Best Practice: Beneficiary Bank Validation

When you receive an invoice from an international supplier or vendor, it should include the beneficial bank instructions. This will include the beneficiary bank ID (BIC), bank name and bank address. When entering a payment, use a payment platform like CXI's CEIFX software that can verify this information. This helps reduce any chance of delay in the payment being received. Once a payment has been received, create a repetitive form template so you don't have to continue to enter the beneficiary information for each payment, speeding up entry and eliminating entry errors.

Interested in having a custom international payments strategy or foreign exchange risk plan?

3. Not Exchanging U.S. Dollars into Foreign Currency for International Payments

Most corporations tend to assume their international payments in U.S. dollars will automatically settle in the foreign bank when this is far from the truth. Usually, foreign companies will end up converting it for you when the payment reaches their local bank.  Due to this, foreign companies invoicing in USD without a USD based bank account will add a risk padding to compensate for any negative exchange rate movement. This ends up being a higher exchange rate and also exposes you to being charged extra hidden fees. 

Best Practice: Dual Invoicing

Ask every international vendor or supplier currently providing USD invoices to provide an invoice in their local currency. When you have both invoices, you can compare the USD cost with the vendor's local currency to see what the effective exchange rate is on the invoice. Now compare this rate with CXI's international payments rate to see how much you can save on each payment. This best practice of dual invoicing uncovers savings for many companies.

Interested in having a custom international payments strategy or foreign exchange risk plan?

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