Platforms must never collect payments themselves and then transfer them to sellers; funds must be settled directly via a licensed payment institution.

1. Platforms must never collect payments themselves and then transfer them to sellers; funds must be settled directly via a licensed payment institution.

Cost: No monetary cost is involved. However, it requires some time to integrate a product from a licensed payment institution — that is, a company holding a payment license issued by the People’s Bank of China. By using such institution’s split-payment or escrow features, buyer payments are transferred straight to sellers without ever entering the platform’s own accounts.

In plain terms: If a platform first receives buyer payments into its own account and then forwards them to sellers, it is effectively operating a payment business. Running such a business requires explicit approval from the People’s Bank of China as well as a minimum registered capital of 100 million RMB, paid in cash. Operating without this approval leads to immediate shutdown, confiscation of all earnings, heavy fines, and personal penalties for owners and responsible staff; in severe cases, criminal charges may also apply. The only safe approach is to ensure that no funds ever land in the platform’s account.

Benefit: According to regulations, a payment business is defined as “transferring monetary funds based on electronic payment instructions submitted by payers or payees.” In other words, it involves moving money on behalf of others per their instructions. To operate such a business, one must obtain a payment license from the People’s Bank of China, and the minimum registered capital must be 100 million RMB, paid in full. Unauthorized operation results in immediate closure, seizure of all profits, and fines ranging from 500,000 to 2 million RMB if no profit was generated or if profit fell below 500,000 RMB; additionally, a further fine of 100,000 to 500,000 RMB applies to legal representatives and responsible personnel. Criminal law also classifies “illegally conducting fund payment and settlement services” as illegal business activity; serious violations may lead to imprisonment of up to five years, while especially grave cases incur sentences exceeding five years. As of May 2024, the threshold for “serious” violations is defined as total illegal transaction volume exceeding 5 million RMB or illegal profits surpassing 100,000 RMB nationwide.

Evidence grade: A

Notes: Designing the payment flow so that funds never enter the platform’s account is the sole safe method. In industry parlance, this practice is sometimes called “second clearing,” though this term does not appear in official documents; instead, regulations refer to it as “indirectly engaging in payment services.” The Supreme People’s Court and Supreme People’s Procuratorate explicitly list only three scenarios as illegal: fabricating transactions for cash-out, using corporate accounts for cash-out, and using cheques for cash-out. Platform-based collection and redistribution of payments are not explicitly named, so this description strictly follows statutory wording without asserting that it automatically constitutes a crime.

Sources: State Council of China (2023). Regulations on the Supervision and Administration of Non-bank Payment Institutions (State Council of China Order No. 768, Articles 2, 6, 8, 27, and 47). <https://www.gov.cn/gongbao/2024/issue_11086/202401/content_6924970.html>; People's Bank of China (2024). Detailed Implementation Rules for the Regulations on the Supervision and Administration of Non-bank Payment Institutions (People's Bank of China Order [2024] No. 4, Article 68). <https://www.gov.cn/gongbao/2024/issue_11546/202408/content_6970979.html>; National People's Congress (1997). Criminal Law (Article 225, Item 3). <https://www.spp.gov.cn/spp/fl/201802/t20180206_364975.shtml>; Supreme People's Court of China, Supreme People's Procuratorate of China (2019). Interpretation of Several Issues Concerning the Application of Laws in Criminal Cases of Illegal Fund Payment and Settlement Business and Illegal Foreign Exchange Trading (Articles 1, 3, and 4). <https://www.spp.gov.cn/xwfbh/wsfbt/201901/t20190131_407161.shtml>