Cen­tral bank reg­u­la­tions give big boost to Fu­jian pi­lot free trade zone

China Daily (Canada) - - BUSINESS - By JIANG XUEQING in Xi­a­men, Fu­jian jiangx­ue­qing@china daily.com.cn

China’s cen­tral bank has is­sued de­tailed reg­u­la­tions on ex­pand­ing cross-bor­der use of the yuan in the China (Fu­jian) Pi­lot Free Trade Zone. It will bring more busi­ness op­por­tu­ni­ties to com­mer­cial lenders in Fu­jian prov­ince, bankers said.

Qi Yun, deputy gen­eral­man­ager of Bank of China Ltd’s Xi­a­men branch, said: “We’ve been wait­ing for de­tailed reg­u­la­tions on cross­bor­der use of the yuan for a long time.

“The Peo­ple’s Bank of China did open up cer­tain poli­cies this time. It will bring a lot more busi­ness op­por­tu­ni­ties for banks as well as more fi­nan­cial ser­vices and prod­ucts for in­di­vid­u­als and com­pa­nies in the free trade zone.”

He said it is not easy for the cen­tral bank to make such a step for­ward at the present stage, con­sid­er­ing that the Chi­nese econ­omy is fac­ing downward pres­sure.

Lian Geng­sheng, di­rec­tor of the ad­min­is­tra­tion of the Xi­a­menAreaoftheFu­jian­free­trade zone, said un­der the new rules, in­di­vid­u­als who work or live in the FTZ will be al­lowed to make over­seas di­rect in­vest­ments.

Abanker who de­clined to be named said it means that from now on, in­di­vid­u­als can make di­rect in­vest­ments in over­seas com­pa­nies although the cen­tral bank is un­likely to al­low them to in­vest di­rectly in stocks and real es­tate in an­other country.

The up­per limit on over­seas di­rect in­vest­ments by in­di­vid­u­als still re­mains un­known, ac­cord­ing to a no­tice is­sued last week to bank­ing in­sti­tu­tions by the Xi­a­men cen­tral sub­branch of the PBOC, the cen­tral bank.

Be­fore the new move, cross­bor­der yuan set­tle­ment for th­ese in­di­vid­u­als was re­stricted to trade in tan­gi­ble prod­ucts and in ser­vices.

The PBOC will also widen the scope of two-way cross­bor­der yuan cash pool­ing for multi­na­tional cor­po­ra­tions by low­er­ing the en­try thresh­old.

As a mod­ern in­stru­ment of cash man­age­ment, cash pool­ing en­ables com­pa­nies to cen­tral­ize liq­uid­ity man­age­ment and op­ti­mize in­ter­est in­come.

Multi­na­tion­als are al­lowed to choose a mem­ber of the group that is reg­is­tered in the Fu­jian FTZ as the lead­ing com­pany to set up a two-way cross-bor­der yuan cash pool. Mem­bers of the group par­tic­i­pat­ing in cash pool­ing must have been op­er­at­ing for more than a year.

Pre­vi­ously, a Chi­nese mem­ber of the multi­na­tional group that is al­lowed to join the cash pool was re­quired to post an op­er­at­ing rev­enue of no less than 1 bil­lion yuan ($154 mil­lion) in the pre­vi­ous year, while the min­i­mum re­quire­ment for an over­seas mem­ber was 200 mil­lion yuan.

But now, both fig­ures cut in half.

Fur­ther­more, the ceil­ing for cross-bor­der yuan cap­i­tal net out­flows or net in­flows is are raised from half to the equiv­a­lent of the owner’s eq­ui­ties of the group’s mem­bers par­tic­i­pat­ing in the cash pool.

“Through build­ing a twoway cross-bor­der yuan cash pool, we’ll lower the op­er­at­ing costs for the cor­po­ra­tions with sub­sidiaries both in and out­sideChi­naand­willimprovethe use ef­fi­ciency of funds,” Qi said.

Bank of China is look­ing for­ward to ex­pand­ing its busi­ness in two-way cross-bor­der yuan cash pool­ing. Af­ter re­ceiv­ing the no­tice of the cen­tral bank, the BOC Xi­a­men branch opened a cash pool ac­count for a sub­sidiary of Xi­a­men Fi­nan­cial In­vest­ment Group. The max­i­mum size of the cash pool is 18.5 bil­lion yuan.

Yang Zhan­peng, gen­eral man­ager of the BOC Fu­jian branch, said the branch pro­vided cross-bor­der yuan set­tle­ment ser­vice worth a to­tal of 276 mil­lion yuan for nine com­pa­nies on Fri­day. TheBOC Ping­tan branch at the Fu­jian FTZ helped two in­di­vid­ual clients trans­fer­ring yuan funds from Tai­wan to their per­sonal cur­rent ac­counts with the bank onMon­day.

The no­tice also listed sev­eral other de­tailed reg­u­la­tions, in­clud­ing a rule that will al­low fi­nan­cial in­sti­tu­tions and com­pa­nies in the Fu­jian FTZ to use the funds flow­ing back to China af­ter the money is raised through the is­suance of off­shore yuan bonds.

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