China eases cross-border currency rules: Sources

REUTERS: China has eased strict cross-border currency rules for 13 multi-national firms including Samsung and Shell in a scheme that further cranks open its tightly controlled capital account, financial sector sources told Reuters.

The experiment, which has not been publicly announced by the government, gives firms freedom to shift funds worth up to 30 percent of their invested capital in China across its borders, bankers directly involved in the scheme said.

The move responds to growing demand from international firms operating in China for freedom to use soaring stores of yuan, also known as the renminbi, to boost the efficiency of their management of capital while keeping speculative pressure at bay.

“It’s a way of opening up the capital account which helps companies deal with the real flows of the economy,” Michael Vrontamitis, Head of Product Management of Transaction Banking for East Asia at Standard Chartered in Hong Kong, told Reuters.

“Those are the real flows. These companies are not speculating on the currency,” said Vrontamitis, whose bank is handling transactions for Shell under the pilot programme.

Six of the firms involved are foreign, eight company executives and bankers with knowledge of the matter said. They are Shell, Samsung, Intel Inc, Alcatel-Lucent, Schneider Electric and Caterpillar Inc.

The other seven companies are Chinese state-owned enterprises: Sinochem Corp, China Minmetals Resources, China Shipping Group, COFCO Group, Baosteel Iron & Steel, Shanghai Electric Group Co. and China Eastern Airlines.

Some of the names of participating companies and banks have been reported in the Chinese media, but the full list has not been disclosed. The currency regulator declined to comment.

At least four banks, including Standard Chartered, HSBC, Citigroup Inc and Bank of China, will help Beijing run the test, called the “Foreign Currency Centralised Management Pilot”, bankers said.

“This is meaningful even though it’s just 13 companies. It’s a pragmatic approach in liberalising the capital account,” said Zhang Zhiwei, chief China economist with Nomura in Hong Kong.“They want to push renminbi internationalisation and to do that, they need to get the renminbi somewhat convertible and the capital account somewhat open.”

Reuters reported earlier this month that the People’s Bank of China (PBOC) would use swelling foreign holdings of around 1 trillion yuan ($160 billion) to help drive the relaxation of capital controls to make the currency basically convertible by 2015 or 2020 at the latest.