Further financial reform measures for Shanghai free-trade zone
By Julian Zou and Eric Zhang
On 2 December 2013, the People’s Bank of China (PBOC) issued its opinion concerning financial support for building up the Shanghai free-trade zone (FTZ). The opinion aims to support the government’s goal to accelerate China’s economic development and further expand cross-border investment and trade by facilitating the conversion between RMB and other currencies and market-oriented interest rate reform in the Shanghai FTZ. The opinion only contains guidelines; implementation will occur after implementing rules have been adopted. This alert focuses on several major measures in the opinion that are related to outbound investment by Chinese persons and inbound investment in China by foreign investors.
The opinion introduced the RMB and foreign currency free-trade bank account, a new type of bank account that can be opened by FTZ residents (entities as well as individuals) in the FTZ and non-FTZ residents with banks or their branches in the FTZ. Free-trade accounts opened by FTZ residents not only can be utilised in the financing activities discussed in the next section, but also for free transfer of funds with any offshore bank accounts, domestic bank accounts of non-PRC persons, free-trade accounts opened by non-FTZ residents and other resident accounts.
A resident account will enable its resident holder to bypass time-consuming approval requirements when converting RMB into foreign currencies for purposes of outbound payment or receiving foreign currency from trade, licensing or other transnational business activities. This undoubtedly will speed up cross-border transactions and also make the process more predictable…
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