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
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
As the implementing measures to the Opinion on Providing
Financial Support for the Development of the China (Shanghai) Pilot
Free Trade Zone
(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.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Developing Asia is facing considerable headwinds. Delayed recovery in major industrial economies and moderating prospects for the large economies of the China and India weigh on region's project growth forecasts.
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