Nov. 29 – In a move to strengthen ties with the Association of Southeast Asian Nations (ASEAN) and South Asian countries, China’s central bank and 10 other departments jointly released the “Overall Plan for Yunnan Province and Guangxi Zhuang Autonomous Region in Constructing the Close-Border Financial Reform Pilot Zone (hereinafter referred to as the ‘Plan’)” on November 20. The Plan approves the establishment of a new financial pilot zone in Yunnan Province and Guangxi Zhuang Autonomous Region, which will serve as a testing ground for the nationwide financial reforms.
The financial reform pilot zone in Yunnan and Guangxi (hereinafter referred to as the ‘Pilot Zone’) is the fourth of its kind in the country, following others in Zhejiang Province, the Pearl River Delta region and Fujian Province.
Zhou Xiaochuan, governor of China’s central bank, said the launch of the Pilot Zone reflects the spirit of the Third Plenum, which stipulates that reform and innovation are keys to the nation’s economic development, and the country will actively promote the reform of the financial market.
“Yunnan and Guangxi are both neighbors of ASEAN, which gives the two places a unique advantage to pilot the financial reform,” Zhou said.
The Pilot Zone is now the largest among the existing pilot zones, and is also the one with largest population and longest border with surrounding countries. According to the Plan, the Pilot Zone covers an area of 317,700 square kilometers with a population of 44.2 million, and includes the following nine cities and prefectures in Yunnan and six cities in Guangxi:
The Pilot Zone aims to expand the cross-border use of RMB to enhance its influence with ASEAN members and South Asian countries, and to explore the RMB’s convertibility under the capital account. Moreover, a diverse modern financial system that matches the economic and social development level of the Pilot Zone will be established within five years, while the financial cooperation relationships among the Pilot Zone, ASEAN, and South Asian countries will be greatly strengthened.
The Plan puts forward the following 10 reform tasks for the Pilot Zone:
- Promoting innovation in cross-border RMB business;
- Improving the current financial system;
- Cultivating a multi-tier capital market;
- Promoting the development of the insurance market;
- Accelerating innovation in rural financial products and services;
- Facilitating trade and investment;
- Bolstering cross-border cooperation in financial infrastructure construction;
- Improving the local financial regulation systems; and
- Establishing a risk prevention mechanism.
In addition, the scale of currency swap agreements among China, ASEAN and South Asian nations will be expanded, and financial institutions in the ASEAN and South Asian countries will be encouraged to set up branches in Yunnan and Guangxi.
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