China’s B2B ecommerce sector is booming. It attracted over 5 billion yuan in 2015; a year-on-year increase of about 699%.
With a sizeable class shift in China in recent times, the consumer environment is more diverse than it once was. The teeming millions have become sophisticated online consumers and a great source of revenue for businesses. Foreign companies see this, and want a piece of the Chinese market.
However, it’s not easy doing business in China. Many companies point out that the country’s laws and regulations restrict money flow - a Chinese national cannot move more than USD 50,000 a year out of the country. This situation is exacerbated by gaps in the current cross-border payment system, which makes transactions to and from China a tedious task. This limits trade, but can also dampen the spirits of the next generation of business leaders.
According to our research, each year close to a quarter of a million Chinese students study overseas in the USA alone. No doubt it can be troublesome when families need to settle tuition abroad – they can get stuck. The accessibility to a simple, secure and efficient payment service is what these families require. This we feel will ease the burden on families and students.
The good news is China is changing. With the International Monetary Fund’s decision to recognize China as guardians of “global reserve currency”, the country has joined the global financial community. The removal of the “one currency, two rates” gap between offshore markets and more tightly-controlled onshore renminbi trading is also seen as an effort by the Chinese government to better regulate its currency and encourage cooperation between financial institutions.
This provides a growing opportunity for payment service companies in China to partner with established international payment companies to ease cross-border payments. Together with Western Union and UnionPay International, Geoswift is working with a number of companies to increase efficiency in cross-border transactions.
In their partnership with Tenpay (a leading third party online platform), the triumvirate offer online overseas tuition payment to over 400 universities and higher education institutions across 9 countries in Asia, Europe and North America.
In an effort to integrate further into the global economy, China is now actively promoting the international use of its currency. The Chinese government is expanding its Free Trade Zones and has created a payment system for easier settlement of cross-border RMB transactions.
Three new Free Trade Zones1 were opened in April 2015 to ease restrictions on foreign currency exchange and foreign participation in China’s ecommerce sector.
China is making some early inroads into cross-border payment systems. Last year, China’s Cross-Border Inter-Bank Payments System (CIPS) partnered with SWIFT to launch a global payment system using their international network. CIPS allows banks to clear cross-border payments without using an offshore RMB centre. It sends payment orders which are subsequently received and settled by correspondent accounts at the counterparty bank.
It’s a good start to making cross-border payments easier, but the high cost of transactions through CIPS remains a concern. Also, as AML/KYC is increasingly scrutinized globally, the soundness of money transfers is of particular concern.
To keep China’s market attractive and viable for foreign trade, it’s vital that companies continue to collaborate to find an answer to the cross-border payment conundrum.
1China Announces Location of New Free Trade Zones, Expands Shanghai FTZ, Jan 6, 2015 - http://www.china-briefing.com/news/2015/01/06/china-rolls-new-ftzs-expands-current-one.html
About Raymond Qu
With 20+ years of management experience, Raymond has built Geoswift from humble beginnings to a leading provider of cross-border payment solutions by forming strategic partnerships, driving state-of-the-art technology development, and recruiting key executives from McKinsey, Citibank, MasterCard, PayPal, Visa, PricewaterhouseCoopers, HSBC, China Minsheng Bank, Travelex, China UnionPay, Global Collection, Electronic Arts and other major financial institutions globally.
About Geoswift
Geoswift is an innovative payment technology company connecting China and the rest of the world. The company is made up of the world’s leading payment technology experts who possess a deep understanding of the payments industry and technology. Combined with comprehensive knowledge of global and China monetary policy, Geoswift provides clients with customized one-stop cross-border payment solutions to and from China.
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