10 May 2016
Guangdong FTZ Expands Cross-border Use of Renminbi
The Guangzhou Branch of the People’s Bank of China (PBOC) has recently issued a circular on supporting expanded cross-border use of renminbi in the Guangdong Pilot Free Trade Zone (FTZ). The five points highlighted in the circular are: handling cross-border renminbi business under the current account or direct investment account for individuals in the FTZ, lowering the entry threshold for multinational corporations in the FTZ to conduct two-way cross-border renminbi capital pooling, facilitating financial institutions and enterprises operating in the FTZ to repatriate renminbi funds raised from issuing bonds offshore, allowing domestic use of capital raised by Panda bonds issued by the overseas parent company of enterprises in the FTZ, and encouraging banks in the FTZ to extend renminbi loans offshore.
It is learnt that the Guangdong Branch of the Agricultural Bank of China (ABC) has improved the internal system in a bid to carry out the relevant business as first priority. Currently, the bank has reached understanding with 10 multinational corporations in the FTZ on cross-border two-way renminbi capital pool business and proposed to release offshore renminbi loans in the amount of Rmb200 million to an offshore company of an enterprise controlled by the central authorities. It will also make headway in cross-border renminbi business under personal direct investment. According to an ABC Guangzhou’s official in charge of the relevant business, the new FTZ policy expands the scope of individual cross-border renminbi business, optimise customer access conditions for cross-border renminbi capital pool and expand the amount of net capital inflows, while allowing domestic use of overseas bonds when necessary by domestic financial institutions and enterprises, domestic use of Panda bond funds, renminbi loans extended to offshore entities and offshore projects by banks in the FTZ. The new policy provides details to the relevant content of the Guiding Opinions of the PBOC on Financial Measures to Support the Development of the China (Guangdong) Pilot Free Trade Zone, giving further support to the use of renminbi in carrying out cross-border trade and cross-border investment and financing by organisations and individuals in the FTZ.
Since the Guangdong FTZ was established a year ago, the ABC Guangdong Branch has stepped up innovation in terms of institutional arrangement, financial products, service mode and interaction with corporates, and has accumulated a wealth of experience in financial innovation in its business support of economic development of Hengqin and Nansha. Statistics show that the bank has extended more than Rmb10 billion in loans to Hengqin and Nansha infrastructural development projects and enterprises in the FTZ providing local enterprises of all types with global cash management, trade finance, foreign exchange, foreign-related financing and international settlement services.