Yuan payments to China: all you need to know
The Chinese yuan is the new kid on the block. The advantages of using the renminbi to pay providers are encouraging companies to use the Mao currency more and more, although there are important requisites to consider.
The yuan was completely restricted from the markets until 2009. That year, the People’s Bank of China decided to internationalise the use of its currency and allowed the yuan to be deliverable in Hong Kong.
This decision led to the creation of an offshore market, giving birth to the CNH or “offshore yuan”, in contrast to the “onshore yuan”, the CNY used in mainland China. Chinese companies convert CNH to CNY with relative ease, while the CNY is converted to CNH when it is transferred from a bank account in mainland China, to an offshore account in Hong Kong in relation to a commercial payment.
The CNY remains being strictly controlled by the Chinese authorities. Its floatability is restricted to a 2% range above and below a daily reference rate published by the People’s Bank of China.
The offshore yuan, on the contrary, can be freely traded on foreign currency markets, and its exchange rate is determined by supply and demand (at least theoretically). Yet, there are strict rules to abide when trading with the CNH.
Requisites for CNY trades with China:
Apart from the details requested in any regular international transaction, like beneficiary name and full address, beneficiary bank´s name, bank account number and bank code (BIC), yuan payments require two mandatory items: the payment code and the CNAPS routing code.
1. Payment code
The PBOC launched in 2014 the “CNAPS2” the protocol that regulates yuan payments to China. The CNAPS2 requires the payer to indicate the purpose of the cross-border remittance with a standardised payment code. If that purpose code is not included, the payment will be returned
2. CNAPS routing code
The CNAPS routing code is the Chinese equivalent of the sort code to identify the bank and the branch where the beneficiary’s account is held.
Kantox is a quick and simple alternative to send payments to China in Yuan. With Kantox Payments Hub, both the payment code and the CNAPS routing code will be added automatically to the payment details.
Likewise, the CNAPS routing code will show up automatically when the beneficiary bank has been selected on the platform.
Kantox Payments Hub allows businesses to process international payments with minimal human interaction, liberating the accounting team of low-value tasks and minimising human error.