1. Overview

  • On 20 February 2014, the People’s Bank of China (PBOC) issued the Measures Supporting the Expansion of Cross-border Use of Renminbi in the China (Shanghai) Pilot Free Trade Zone (《关于支持中国(上海)自由贸易试验区扩大人民币跨境使用的通知》)(PBOC Notice). The PBOC Notice provides various policy support in relation to the cross-border use of Renminbi (RMB) in the China (Shanghai) Pilot Free Trade Zone (FTZ), including: (1) cross-border RMB settlement for current account and direct investment; (2) individual RMB settlement account; (3) offshore RMB borrowings by FTZ entities; (4) two-way cross-border RMB cash pooling; (5) centralized current account RMB payments and collections; (6)RMB settlement for cross-border e-commerce; and (7) cross-border RMB trading.
  • As the implementing measures to the Opinion on Providing Financial Support for the Development of the China (Shanghai) Pilot Free Trade Zone (《关于金融支持中国(上海)自由贸易试验区建设的意见》) (PBOC FTZ 30 Rules) issued by PBOC in December 2013, the PBOC Notice further sets out the operational rules for the relevant cross-border use of RMB businesses in the FTZ. These operation rules enable the use of RMB in cross-border transactions by FTZ entities and individuals, lower the capital costs, and facilitate cross-border capital management by multinational corporations (MNCs). The PBOC Notice is a substantial and reformative step in the development of RMB internationalization. However, as the PBOC officer pointed out, policy innovation and relaxation of control on RMB capital account will be in a gradual pace. There will be further clarification on certain items that are not covered in the PBOC Notice, such as the detailed operation procedure and fund movement supervision of the FTA accounts in the FTZ, overseas securities investment and financial products investment by FTZ entities and cross-border fund movement under capital account for FTZ individuals.

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