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China Country Summary

Sanctions

EU embargo on Arms / US restrictions on Chinese Military companies

FATF AML Deficient List

No

Terrorism
Corruption
US State ML Assessment
Criminal Markets (GI Index)
EU Tax Blacklist
Offshore Finance Center

Please note that although the below Summary will give a general outline of the AML risks associated with the jurisdiction, if you are a Regulated entity then you may need to demonstrate that your Jurisdictional AML risk assessment has included a full assessment of the risk elements that have been identified as underpinning overall Country AML risk. To satisfy these requirements, we would recommend that you use our Subscription area.

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Anti Money Laundering

FATF Status

China is not on the FATF List of Countries that have been identified as having strategic AML deficiencies

Compliance with FATF Recommendations

The last follow-up Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in China was undertaken in 2022. According to that Evaluation, China was deemed Compliant for 9 and Largely Compliant for 22 of the FATF 40 Recommendations. It remains Highly Effective for 0 and Substantially Effective for 3 of the Effectiveness & Technical Compliance ratings.

Sanctions

China implements two types of economic sanctions: those mandated by the United Nations and its own counter-sanctions against foreign entities. The Ministry of Foreign Affairs and the Ministry of Commerce are responsible for administering and enforcing these sanctions, which often target regions with contested statuses like Taiwan and Hong Kong.

The UK National Crime Agency has issued a Red Alert regarding Russia's attempts to circumvent sanctions through intermediary countries, including China. Businesses are advised to exercise caution with transactions involving high-priority items that may be linked to sanctions evasion.

Bribery & Corruption

Rating 0 (bad) - 100 (good)
Transparency International Corruption Index 42
World Bank: Control of Corruption Percentile Rank 55

Since 2012, China has implemented a significant anti-corruption campaign, with the National Supervisory Commission-Central Commission for Discipline Inspection (NSC-CCDI) expanding its investigations to include a wide range of officials and state-owned enterprises. Despite the government's efforts, including stricter penalties for corruption and public participation in reporting, corruption remains pervasive, impacting the business environment and leading to practices like bribery and political interference. Companies operating in China face high risks related to corruption, and while there are laws against corrupt practices, enforcement is often inconsistent.

Economy

In 2023, China's economy faced challenges as inbound foreign direct investment (FDI) fell by 13.7% to $163 billion, attributed to a slower-than-expected recovery from COVID-19 and various regulatory and geopolitical factors affecting investor confidence. Despite being the fourth-largest FDI destination globally, the country remains highly restrictive, ranking 11th on the OECD FDI restrictiveness index, with significant barriers including foreign ownership caps and joint venture requirements in key sectors. The economic relationship with Russia has also raised concerns among investors, as trade and investment ties deepen amid ongoing geopolitical tensions.

In 2023, China's Foreign Direct Investment (FDI) fell to $163 billion, marking a 13.7% decline from the previous year, largely due to a slower economic recovery post-COVID-19 and various investor concerns, including regulatory unpredictability and geopolitical tensions. The country ranks as the 11th most restrictive for FDI according to the OECD, with significant barriers such as foreign ownership caps and joint venture requirements in key sectors. Despite these challenges, the Chinese government has made efforts to improve the foreign investment environment, including extending tax holidays for foreign investors until 2027.

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