China Issues Financial Reform Guidelines to Boost Shanghai Free Trade Zone

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Dec. 5 – The People’s Bank of China (PBOC) released the “Opinions on Leveraging the Role of Finance in Supporting the Construction of China (Shanghai) Free Trade Zone (hereinafter referred to as ‘Opinions’)” on December 2, which puts forward the detailed financial reform guidelines to support the Shanghai Free Trade Zone (Shanghai FTZ).

The Opinions mainly cover the following four aspects:

  • Exploring ways to facilitate investment and financing remittance, and promoting the convertibility of capital account;
  • Promoting the cross-border use of RMB to allow enterprises and individuals in the Shanghai FTZ to use RMB to carry out cross-border trade in a more flexible way;
  • Pushing forward the market-oriented reform of interest rate; and
  • Deepening foreign exchange reform and further streamlining administrative examination and approval, so as to gradually establish a suitable foreign exchange control system.

Detailed information can be found below.

Financial Reform Guidelines

Highlights of the Opinions are hereby summarized as below:

  • Allowing residents of the Shanghai FTZ to set up “resident free trade accounts” in both domestic and foreign currencies, and allowing RMB to be fully convertible under those accounts “when conditions are ripe”;
  • Allowing non-residents of the Shanghai FTZ to open the “free-trade accounts for non-residents” and to enjoy financial services according to the pre-establishment national treatment principles;
  • Allowing foreign banks and other enterprises registered in the Shanghai FTZ to invest in Shanghai’s securities market;
  • Allowing foreign companies with subsidiaries in the Shanghai FTZ to issue RMB-denominated bonds;
  • Allowing qualified individual investors to conduct various foreign investment, including trading overseas securities;
  • Allowing enterprises in the Shanghai FTZ to borrow RMB funds from overseas lenders;
  • Allowing enterprises in the Shanghai FTZ to directly invest overseas without going through pre-approval procedures;
  • Allowing financial institutions in Shanghai to provide RMB clearing services to cross-border e-commerce business;
  • Allowing financial institutions in Shanghai to handle the cross-border RMB transactions related to current account and FDI transactions;
  • Allowing certain qualified institutions to issue negotiable certificates of deposit; and
  • Removing the interest rate ceiling on small amount of foreign currency deposits at an appropriate time.

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