Are you looking to find cheaper and faster ways to send payments to your Chinese suppliers?
I remember when I sent one of my first wires to China back in 2006. The bank was so nervous that I was sending it to some fraud company in China. I walked down to my nearest Bank of America in New York City, filled out all the paperwork and submitted to the teller. I don’t think she had handled many international payments, or maybe had cases of a previous client getting scammed, so she asked me:
“Are you really sure, do you know this company in China, you know you can’t get this money back”.
I was already so nervous, but this made me even more shakier. Yet I told her, yes, yes I know. Please send this money through. So they debited the $45usd wire free from my account and sent it over to the other side of the world.
I got a slip, took a photo of it, connected my phone to my laptop, downloaded the image, and then emailed it to the client. Yes, I did it this manually.
Times are a changing, and finally there are new and better ways to LEGALLY send Chinese Yuan to your Chinese supplier.
Now You Can Send RMB from your US Bank Account
So when I did that payment back in 2006, there was no way for me to send Chinese Yuan (RMB) to the supplier. The supplier had to have a USD business bank account in order to do business with me. That blocked out some of the smaller (and cheaper) factories in China who didn’t have the licenses and other documents required to accept USD direct.
But US banks still don’t have the option to send Chinese Yuan. So how can you do it? One of our previous podcasts we had Richard Bensberg from Remitsy talking about his company, as well as sharing a ton of value on the international payment scene. They leverage the blockchain and bitcoin technology. This allows them to be the mediator and low cost transfer provider for money across these financial and digital borders.
They take their technology and pass those savings onto you.
Why Send Chinese Yuan?
So before we go into the how it works, let’s talk about the way sending Chinese Yuan is better. We have had podcast listeners thanking us again and again to get their prices in RMB from the supplier. They say the profit margins these suppliers put on the USD/RMB conversions was crazy high, and once they took out this “risk” from the factory, they could get the direct price.
While you may be upset your factories are premium fee (higher spread) on the foreign exchange conversion, you need to also understand why.
They are doing this to protect the fluctuations in the currency. If the currency changes, they could lose money on the RMB/USD conversion. So they need to add this risk into their price.
By you asking them to give you a RMB price instead of USD price, it lowers the changing factors in their price. They will just look at their cost of labor, materials, and other “Domestic” costs.
Therefore, your price should be much lower. Of course now you are taking the currency risk. If the USD drops to the RMB, you will need to send them more dollars. But current trends are going the other way, so you will need to only send them less dollars as the RMB depreciates to the dollar.
Many massive buyers from Chinese suppliers have been complaining they don’t see cheaper prices on their USD FOB price from the supplier. But if you’re getting quoted in RMB, then you will see the cheaper USD price yourself, in real time!
Must Be To Their Business Bank Account
So how can you get this to work? I have used Remitsy and they are very “above board”. They can’t risk getting in trouble for not collecting the proper paperwork on the transaction. Therefore, it must be a payment to a Chinese business account, not a personal account.
This shouldn’t be a problem if it is a legitimate supplier. Yet, as many things in China, there are those who look to save money. Some smaller suppliers may try to convince you to pay their personal account, as they can lower their tax exposure. Just so you understand, any money that goes into their business account will be subject to tax and hard for them to “write off”. Personal payments they have ways to lower their tax liability. At least that is what I am told.
So when the supplier asks for your payment, ask them to send you a proper invoice. From their business, and with payment instruction listed on the invoice to their business bank account.
Here’s an example of how the invoice should look:
Once you have the invoice, you can then use that to upload to Remitsy’s website to place the order.
Skip the Need To Open a Chinese Bank Account
You can now skip the need to have to open a Chinese bank account. That is, for the need to send Chinese Yuan to your suppliers. For “real” domestic business in China, like receiving sales and paying staff, you may need to invest in a Chinese company and bank account. I am in a ton of Wechat groups, and I always see someone “squirming”
For example, a French business owner with a Chinese company was on holiday in Thailand. He was trying to make a payment to his supplier via online banking in his Chinese business bank account. For those familiar with a Ukey, you can only imagine the pain. He wasn’t sure why it wasn’t working – was it because he was in Thailand and his IP address flagged him as a potential fraudster? He tried different browsers, different systems, just couldn’t get a way to send money to an important supplier for a big order.
If he was using a service like remitsy.com he could just send the RMB from his overseas company bank account via their system, uploading the invoice, and be done with it. Headache prescribed and pain relieved!
And even though we are in 2016, still tons of banks around the world force people to come into a brand to make wire instructions! Even in America there are tons of these banks.
So it is worth a shot, leverage a new technology trying to change the painful way that banks make businessmen go insane!
What Do you Think? How do you currently Pay your China Supplier?
Hope today helped you out. I want to disclose as well as thank Remitsy for sponsoring our Cross Border Summit, as well as sharing on our podcast. I was not paid to make this post, but instead think it is a great service that needs more exposure!
They have offered a free payment for anyone who tells them they found out about them from the Global From Asia site – so may as well try them out and see for yourselves!
Their customer service is amazing, they will live chat reply to you and answer any questions you may have.
I just spoke w/ Richard the CEO of Remitsy – and he is kind enough to insist on a referral program for us here at Global From Asia – so if you would like to give us a bit of commission when you sign up – feel free to do so here when signing up for Remitsy