Payment systems in China: CIPS, CNAPS, Alipay and WeChat Pay

A Chinese supplier may ask for payment to a bank account, in yuan via CIPS, and sometimes even via Alipay or WeChat Pay. These are different systems with different rules. For the payment to arrive without raising currency control questions, it helps to understand how they work.

How settlements work in China

China’s payment system is regulated by the People’s Bank of China. Foreign exchange transactions are supervised by the State Administration of Foreign Exchange (SAFE). Three levels matter for business:

• the national interbank system CNAPS, which carries yuan payments within the country;
• CIPS, the cross-border yuan settlement system;
• bank transfers in foreign currency through correspondent accounts and SWIFT.

Separately, there are payment services for individuals and merchants: Alipay and WeChat Pay. Their turnover is huge, but they solve a different problem.

When a Chinese bank receives a payment from abroad, it checks that a real trade deal stands behind it. The supplier must confirm the export with its own documents, and the bank will match them against your payment. So the supplier may ask you for documents: the contract, the invoice, sometimes explanations about the goods. If the payment amount and the amount in the export documents do not match, the bank will have questions.

CNAPS: yuan payments within China

CNAPS connects Chinese banks with each other. Each bank branch has its own code in this system, called the CNAPS code. If you pay in yuan, the supplier gives this code in the bank details together with the bank’s SWIFT code. An error in the code delays crediting, so verify it with the supplier before the payment.

CIPS: cross-border yuan payments

CIPS (Cross-Border Interbank Payment System) was launched in 2015 for yuan settlements between China and other countries. The system has direct participants, mostly large banks, and indirect participants that work through the direct ones. The CIPS message format is based on the ISO 20022 standard.

Some Russian banks are connected to CIPS. But being connected does not mean that every yuan payment will go through. The decision to credit the funds is made by the beneficiary’s bank, and it checks the sender, the route and the deal no less strictly than for a dollar payment.

Bank transfers in dollars and euros

If the invoice is in dollars or euros, the payment goes through SWIFT and correspondent banks. For the supplier, this is the familiar method. For an importer from Russia, it is more complicated: there are more banks in the chain, and each of them may ask questions or send the money back. That is why settlements with China are increasingly moving to yuan, if the supplier agrees.

Many Chinese exporters have different accounts for yuan and for dollars, sometimes at different banks. The account number from an old invoice may not work for a payment in another currency. Check with the supplier which account to send the money to in the currency of your invoice.

One more point: some suppliers hold their account not in mainland China but in Hong Kong. Hong Kong has a separate banking system, its own currency, the Hong Kong dollar, and a large offshore yuan (CNH) market. For a payment, this is a different destination, and the route is selected separately. The beneficiary company must still be the same one named in the contract.

Alipay and WeChat Pay

Alipay and WeChat Pay are wallets and payment services for individuals and merchants. In China they are used to pay for almost everything, including goods on wholesale platforms. So a supplier sometimes suggests: “send it to Alipay, it’s faster”.

For a Russian company paying under a foreign trade contract, this is the wrong channel:

• the recipient often turns out to be an individual or a wallet that is not in the contract;
• such a payment will not produce documents that your currency control bank will accept;
• in a dispute with the supplier, getting the money back will be very difficult;
• a payment to an employee’s personal wallet does not prove payment under the contract.

If the supplier insists on a wallet, ask for the bank account details of the company named in the contract. This is a standard requirement, and a bona fide supplier understands it.

The same applies to cards of the national card system UnionPay. They are designed for personal payments and purchases, not for settlements under a foreign trade contract. For a company, there is one right channel: a bank transfer to the supplier’s account, with documents that confirm the deal.

What to ask the supplier for before paying

• The full company name in English, as in the contract, and the name in Chinese.
• The name of the bank and branch, and the branch address.
• The bank’s SWIFT code and, for a yuan payment, the branch’s CNAPS code as well.
• The account number and the currency in which the account accepts funds.
• Confirmation that the account accepts cross-border payments.
• The registered address of the beneficiary company.

It is safer to take bank details from the invoice or the contract. If they came in a separate letter and differ from previous ones, confirm them by calling a number you already know.

Check that the beneficiary name matches in all documents. A discrepancy in even one word is a common reason for a payment to be returned. Other pitfalls of paying China are collected in the article How to transfer money to a supplier in China.

How a payment goes through an agent from the VEDmost network

An agent from the VEDmost pool pays to the supplier company’s bank account named in the contract, in the invoice currency. For each payment we select an agent whose route to the right bank is working now, in yuan or in dollars. We fix the rate and fee in the payment order before the roubles are debited. If you need a guarantee, the roubles wait for execution in a special escrow account at a Russian bank: this scheme is available on request, for an additional fee. More on the Invoice payments to China and Invoice payments pages.