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The Challenges of China’s B2B Payments Systems

By Mike Azzara

China can be simultaneously an attractive market and yet challenging for U.S. businesses, especially small and midsize enterprises (SMEs) looking to handle payments in-country. Whether for customers, suppliers, distributors—or even for running entire operations locally—China’s B2B payments systems can be very different than the U.S. payment realm.

About 90 percent of B2B payments in China are processed by banks alone rather than by financial technology (fintech) firms alone or banks and fintechs in partnership, according to Forrester Research.1 "In addition, the increasingly strict regulation of B2B payments keeps non-bank providers at bay," Forrester said. The research firm noted that even though China has about 4,500 banks that can accept B2B payments for merchants, only 243 non-banking payment providers are licensed to do so, a gap that Forrester expects to continue to widen.


China’s B2B Payment Systems Landscape


SMEs looking to conduct B2B transactions in China may wish to better understand the local B2B payment system mechanisms and the players involved. For example, The China National Advanced Payment Systems (CNAPS) of the People’s Bank of China (PBOC) is the primary domestic electronic payment system in China.


Unlike the separation of ACH, wire, and online B2B payment systems in the U.S., the Bank for International Settlements notes that in China all three are provided as “application systems” on the CNAPS infrastructure.2 The three applications are:


  • High Value Payment System (HVPS), a real-time gross settlement (RTGS) payment system similar to wire transfers in the U.S.
  • Bulk Electronic Payment System (BEPS), for low-value payments, similar to U.S. Automated Clearing House, or ACH, payments.
  • Internet Banking Payment System (IBPS), an interbank channel that enables credit-card and other e-commerce transactions. IBPS (sometimes called Super Online Banking) allows the recipient of the payment to receive it almost immediately.

But wait, there’s more! China’s Local Clearing System can process a subset of transactions where the payer and payee are in the same city. "For example, if a payer in Shanghai initiates a payment to a payee who’s also in Shanghai, the payment may be routed through the Local Clearing System instead of CNAPS as the Local Clearing System is available in Shanghai. Not all cities have a Local Clearing System available," according to a PNC Insights report.3


The main B2B payment method in China is traditional bank transfer. The Forrester report notes this should meet most of the needs for B2B customers, adding that "Non-bank payments will fill the financial gap for unbanked and underbanked microbusiness customers."


McKinsey & Company sees China's digital payments soaring.4 Indeed, McKinsey suggests that China is helping to drive the global electronification of payments, noting that the share of Chinese payments made electronically has risen from 4 percent in 2012 to 34 percent in 2017. McKinsey found that 40 percent of China’s in-person in-store spending is done on mobile digital wallets. However, unlike the U.S., almost all of this is on closed-loop systems like WeChat Pay and Alipay. China’s mobile digital wallet share of payments is projected to increase to nearly 60 percent by 2022, the McKinsey report said.


Language can also be a concern in dealing with B2B payments beyond a company's border. The PNC Insights report pointed out that, depending on the local bank being used, multilingual options sometimes exist for much—but not always all—of the transaction information. Domestic payment transaction details are generally in Chinese, requiring end-users to read or translate Chinese to enter full transaction details or understand information input by others. For B2B transactions, those details may include crucial information, so even if a Chinese bank offers multilingual support an SME may still wish to have team members who are fluent in Chinese.


"Smaller banks (in China) compete with richer solutions and better customer experiences, while mega state-owned banks are still arrogant and look down on SMEs," Forrester noted. The research firm also pointed out that fintechs have massive amounts of consumer and merchant data to leverage for developing innovative and personalized B2B payment offerings for SMEs.


Cross-Border B2B Payments Get Closer Scrutiny


As part of the global crackdown on fraudulent transactions and money laundering, Chinese banking officials inspect cross-border transactions more closely than domestic transactions, the PNC report noted. Unlike domestic payments, cross-border payments in China generally require supporting documentation to demonstrate their veracity. The supporting documentation requirement differs depending on the type of payments made, such as if it’s a capital transaction, trade transaction, dividend, etc.


Given that cross-border payments require verification of supporting documents by the remitting banks prior to processing, these payments are manually processed and therefore take longer than domestic payments. Supporting documentation is typically submitted to the remitting bank either at the branch, or through other means, such as courier. Electronic submission of supporting documentation such as via online banking is becoming more commonplace, so further advancements may be coming for these payments in the near future, PNC said.



Despite its size and massive mobile activity, China can be an attractive market for some U.S. SMEs. But the country’s B2B payment systems landscape likely is different than what U.S. companies may expect, so it’s important to know the local rules.

Mike Azzara  - The Author

The Author

Mike Azzara

Mike Azzara has covered business and technology issues for more than 30 years as a writer, editor, publisher, consultant and analyst for media brands, startups and established corporations. Mike also is a principal at Content Marketing Partners


1. “Define Your Payment Strategy For B2B eCommerce In China,” Forrester;
2. Payment, clearing and settlement systems in China, Bank for International Settlements;
3. “Treasurer’s Guide to China Payments,” PNC Insights;
4. Global payments 2018: A dynamic industry continues to break new ground,” McKinsey & Company;

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