Financial Reforms for the Shanghai (Pilot) Free Trade Zone: slowly coming into focus

When the Shanghai Free Trade Zone ("FTZ") was launched in September 2013, there was much fanfare about the prospect of experimentation in financial and foreign exchange reform and liberalising RMB on the capital account. However, there was little in the way of detail.

The People's Bank of China (China's central bank) and the State Administration of Foreign Exchange have now issued a suite of documents which set out the direction (if not all the answers) that the financial reforms within the FTZ will take.

The key developments are these:

  • enterprises and individuals within the FTZ will be able to open special bank accounts, which will be treated similarly to bank accounts outside China - allowing free movement of funds between those accounts and accounts outside China
  • relaxation of financial and forex regulatory requirements for cross-border direct investment transactions
  • availability of RMB cross-border cash-pooling
  • banks outside the FTZ will be able to support e-commerce operations within the FTZ with cross-border RMB transaction services
  • relaxing approval requirements on outbound investments by Chinese companies within the FTZ

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