FTZ gets boost

PBOC aims to pro­mote mar­ket lib­er­al­iza­tion

China Daily (Hong Kong) - - FRONT PAGE - By WEI TIAN weitian@chi­nadaily.com.cn

The cen­tral bank un­veils a se­ries of fi­nan­cial mea­sures to sup­port growth of the free trade zone in Shang­hai.

The Peo­ple’s Bank of China said on Mon­day it will per­mit busi­nesses and in­di­vid­u­als to open off­shore ac­counts in the China (Shang­hai) Pi­lot Free Trade Zone, a de­ci­sion in­tended to pro­mote cross­bor­der in­vest­ment in the pi­lot area. The cen­tral bank said the move will has­ten progress to­ward mar­ket-de­ter­mined in­ter­est and ex­change rates and pro­mote full con­vert­ibil­ity of the yuan.

Ac­cess to off­shore ac­counts will al­low more com­pa­nies and peo­ple to take part in “grow­ing for­eign-re­lated eco­nomic ac­tiv­i­ties in the FTZ”, ac­cord­ing to a state­ment on the cen­tral bank’s web­site

For­eign na­tion­als will be el­i­gi­ble to open an off­shore ac­count in the FTZ. They will be treated as lo­cal res­i­dents for this pur­pose.

All fi­nan­cial in­sti­tu­tions in Shang­hai will be able to of­fer this ser­vice via a sep­a­rate ac­count­ing unit for FTZ trans­ac­tions.

There will be no bar­ri­ers to money trans­fers be­tween the off­shore ac­counts in the FTZ and over­seas ac­counts. How­ever, trans­ac­tions with do­mes­tic bank ac­counts will be clas­si­fied as cross-bor­der trans­ac­tions and there­fore reg­u­lated.

The ac­counts can be used for cross- bor­der fi­nanc­ing and as­sur­ance, as well as in­di­vid­ual in­vest­ment by Chi­nese na­tion­als in over­seas se­cu­ri­ties and by for­eign­ers in the do­mes­tic cap­i­tal mar­ket, ac­cord­ing to the cen­tral bank.

In­vestors will also be able to con­duct for­eign-cur­rency trans­ac­tions in­volv­ing the yuan within their ac­counts, with­out a daily limit “when con­di­tions ma­ture”, ac­cord­ing to the bank.

The PBOC will also re­move the in­ter­est rate ceil­ing on for­eign-cur­rency de­posits “at an ap­pro­pri­ate time”.

Lu Zhengwei, chief econ­o­mist at In­dus­trial Bank Co, said the big­gest step taken so far by the PBOC to sup­port the new zone was to al­low in­di­vid­u­als to in­vest in over­seas mar­kets. Those in­vest­ments will no longer be re­stricted by quo­tas un­der the qual­i­fied do­mes­tic in­sti­tu­tional in­vestor pro­gram.

For­eign com­pa­nies will also ben­e­fit be­cause they’ll be ex­empt from quo­tas un­der the qual­i­fied for­eign in­sti­tu­tional in­vestor sys­tem, Lu said.

“But im­ple­men­ta­tion of th­ese guide­lines still de­pends on de­tailed op­er­at­ing rules, be­cause there are many re­stric­tive con­di­tions in the de­scrip­tion.”

Li Jian­jun, an an­a­lyst in in­ter­na­tional fi­nance at Bank of China Ltd, said: “Re­form in for­eign ex­change man­age­ment, com­pared with other re­form mea­sures such as in­ter­est rate lib­er­al­iza­tion and yuan in­ter­na­tion­al­iza­tion, is likely to be im­ple­mented faster.”

A re­search note by Shenyin & Wan­guo Se­cu­ri­ties Co Ltd said off­shore fi­nance will be a key area in the de­vel­op­ment of the FTZ in 2014.

Multi­na­tional com­pa­nies will carry out more cap­i­tal set­tle­ments in the FTZ. Fi­nan­cial in­sti­tu­tions will launch more in­no­va­tive off­shore prod­ucts in the area, the se­cu­ri­ties firm said.

So far, 47 fi­nan­cial in­sti­tu­tions, in­clud­ing 12 for­eign banks, have re­ceived ap­proval to set up a branch in the FTZ, two months af­ter the zone was of­fi­cially launched.

As for the pos­si­ble risks as­so­ci­ated with spec­u­la­tive cap­i­tal, the PBOC said it will pay close at­ten­tion to ir­reg­u­lar cross-bor­der cap­i­tal move­ments.

Newspapers in English

Newspapers from China

© PressReader. All rights reserved.