The option of two-way cross-border RMB cash pooling, which had
been available to entities established in the Shanghai Free Trade
Zone for some time, was recently extended nationwide. The
liberalisation of two-way RMB cash pooling is good news for
multinationals doing business in China as well as Chinese companies
investing overseas. Since local banks do not have much practical
experience yet in setting up cash pools that comply with Chinese
regulations, we recommend closely consulting with the People's
Bank of China and local commercial banks when setting up a cash
On 1 November 2014, the People's Bank of China released its
long-awaited Notice of Relevant Issues on Conducting
Centralized Management of RMB Cross-border Fund for Multinational
Corporations. This Circular 324 provides detailed
implementation rules for two-way cross-border RMB cash pooling by
companies established throughout China. It is available nationwide,
and the two-way cross-border RMB cash pooling is no longer a pilot
scheme applicable only in the Shanghai Free Trade Zone (SFTZ).
Before Circular 324 was introduced, companies established outside
the SFTZ were only able to provide one-way RMB lending out of China
to fund their overseas group companies.
Compared to the pilot scheme applicable in the SFTZ, Circular
324 provides a more comprehensive set of rules for two-way
cross-border RMB cash pooling. Chinese domestic companies and
overseas group companies that wish to participate in an RMB cash
pool must meet certain criteria, including having been operational
for more than three years. In addition, the total operating revenue
of the domestic group companies in the previous year must be at
least RMB 5 billion and the total operating revenue of the overseas
group companies in the previous year must be at least RMB 1
Circular 324 sets a cap on the net cross-border RMB inflow at
10% of the total shareholders' equity in the cash pool. The 10%
cap is an initial ceiling and may be adjusted in the future
depending on the economic situation in China and the need for
controlling RMB inflow. There is currently no cap on the RMB
Circular 324 also provides restrictions on using funds in the
RMB cash pool. These funds may not be used for certain specified
Although some restrictions on inflow and outflow of RMB remain,
the possibility to pool RMB cash reserves may provide significant
benefits to multinationals. Multinationals can now include RMB cash
reserves in their treasury management systems and explore ways to
minimise the cost of funds flowing in and out of China. Due to the
recent nature of Circular 324, we recommend that companies who are
interested in setting up an RMB cash pool closely consult with the
local People's Bank of China and their local commercial
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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