With a view to implementing the important strategic deployment made by the CPC Central Committee and the State Council for the development of the China (Shanghai) Pilot Free Trade Zone (hereinafter referred to as the “Pilot Zone”), supporting the development of the Pilot Zone, promoting the development of real economy in the Pilot Zone, strengthening financial support to cross-border investment and trade, deepening the financial reform and open wider to the outside world, the following opinions are hereby put forward:
I. General Principles
1. Adhere to providing financial services for real economy, further promote facilitation of the trade and investment, and open the financial sector wider to the outside world, so as to promote the Pilot Zone to participate in the international competition at a higher platform.
2. Adhere to reform, innovation, and pilot programs, and make great efforts to promote the pilot reforms in the fields such as cross-border use of RMB, RMB convertibility under capital account, market-based reform of interest rates and foreign exchange administration.
3. Adhere to the principle of controllable risks and stable progress, launch one project when its practice becomes mature, and organize pilot programs appropriately and orderly.
II. Innovate in the Account System in Favor of Risk Management
4. A resident within the Pilot Zone may, by opening free trade accounts in RMB and foreign currencies (hereinafter referred to as the “resident free trade account”), achieve the management of separate accounting and carry out the business of innovative investment and financing as described in III hereof; a non-resident may open the non-resident free trade account in RMB and foreign currencies with the banks located in the Pilot Zone (hereinafter referred to as the “non-resident free trade account”), and may enjoy the relevant financial services based on the principle of national treatment prior to admission.
5. The funds may be freely transferred between resident free trade accounts and overseas accounts, non-resident accounts that are opened outside the Pilot Zone within China, non-resident free trade accounts and other resident free trade accounts. The funds may be transferred between the resident free trade account and other bank settlement accounts owned by the same non-financial institutions due to the businesses under current accounts, repayment of loan, industrial investment and other cross-border transactions in compliance with regulations. The fund flows between the resident free trade accounts and the bank settlement accounts that are opened outside the Pilot Zone within China shall be deemed as cross-border business for the purpose of administration.
6. Such businesses as cross-border financing and guarantee may be handled under the resident free trade accounts and non-resident free trade accounts. When the conditions are met, the funds in RMB and foreign currencies within such accounts may be converted freely. The monitor mechanism shall be established in the Pilot Zone for RMB exchange under the resident free trade accounts and non-resident free trade accounts.
7. The financial institutions in Shanghai may, in accordance with the provisions of the People’s Bank of China, by means of establishment of separate accounting units in the Pilot Zone, open the free trade accounts for the eligible entities within the Pilot Zone, and provide the relevant financial services to them.
III. Explore the Ways to Facilitate Currency Exchange in Investment and Financing
8. Facilitate enterprises’ cross-border direct investment. In respect of cross-border direct investment in the Pilot Zone, the cross-border collection, payment and foreign exchange concerned may be directly handled with the banks without prior approval, in accordance with the relevant provisions of Shanghai Municipality.
9. Facilitate individual cross-border investment. The individuals working in the Pilot Zone and meeting the relevant conditions may carry out various types of overseas investment including securities investment in accordance with the regulations. The incomes lawfully obtained by the individuals in the Pilot Zone may be used for foreign payment after the taxes are paid. Individually owned businesses within the Pilot Zone may, in light of their business needs, provide cross-border loans to their overseas operating entities. The overseas individuals working in the Pilot Zone and meeting the relevant conditions may open the special non-resident individual accounts for domestic investment with the financial institutions located in the Pilot Zone and carry out various types of domestic investment including securities investment in accordance with the regulations.
10. Open the capital market gradually. The financial institutions and enterprises in the Pilot Zone may, in accordance with regulations, make investment and conduct transactions in the securities and futures exchanges in Shanghai. The overseas parent companies of the enterprises in the Pilot Zone may issue RMB-denominated bonds in domestic capital markets in accordance with the applicable regulations of China. In light of market demand, the ways shall be explored to conduct international financial asset trading.
11. Facilitate foreign financing. As required by business operation, the Chinese and foreign-funded enterprises, non-banking financial institutions and other economic entities registered in the Pilot Zone (hereinafter referred to as the “entities in the Pilot Zone”) may, in accordance with regulations, raise overseas funds in RMB and foreign currencies, and shall improve the macro prudence management system for all types of foreign debts, and take effective measures to prevent the risks of foreign debts.
12. Provide a variety of risk hedge instruments. The institutions in the Pilot Zone may, based on the management needs for real currency matching and maturity matching, carry out risk hedge management in the Pilot Zone or overseas. The enterprises in the Pilot Zone meeting the relevant conditions are allowed to carry out overseas investment in securities and derivatives in accordance with the regulations. The exposure position arising out of free exchange in RMB and foreign currency provided by the separate accounting units in the Pilot Zone to the institutions in the Pilot Zone or located overseas shall be subject to flatting hedge in the markets in the Pilot Zone or overseas markets. The separate accounting units in the Pilot Zone may, based on their own risk management needs, participate in the trading of derivative instruments in the international financial market in accordance with the regulations. Upon approval, the separate accounting units in the Pilot Zone may, within certain quotas, conduct lending or repurchase transactions in the domestic inter-bank market.
IV. Expand Cross-Border Use of RMB
13. The banking financial institutions in Shanghai may, based on the three principles of “know your clients”, “know your business” and “due diligence”, according to the collection and payment instructions issued by entities (other than the enterprises on the list of enterprises subject to special supervisions for RMB settlement for export trade in goods) and individuals in the Pilot Zone, directly handle the cross-border RMB settlement for direct investment under current accounts.
14. The banking financial institutions in Shanghai may cooperate with the payment institutions in the Pilot Zone which hold the Payment Business Permit and whose authorized business scope covers payments via internet, and provide RMB settlement services for cross-border electronic commerce (trade in goods or trade in services) according to the relevant management policies applicable to the payment institutions.
15. The financial institutions and enterprises in the Pilot Zone may borrow RMB funds from overseas, but the borrowed RMB funds shall not be used for investment in marketable securities or derivatives, nor used for entrusted loan.
16. The enterprises in the Pilot Zone may, based on their own operating needs, carry out two-way RMB fund pool business within the same group, and provide consolidated collection and payment services under current accounts to their domestic and overseas affiliated enterprises.
V. Push Forward Steadily the Market-based Reform of Interest Rates
17. Based on the maturity of the relevant basic conditions, promote the construction of a system for the market-based reform of interest rates in the Pilot Zone.
18. Improve the market-oriented pricing monitor mechanism for the interest rates of the funds in RMB and foreign currencies under the resident free trade accounts and the non-resident free trade accounts in the Pilot Zone.
19. The financial institutions meeting the relevant conditions in the Pilot Zone shall be included into the scope of the entities who may take priority of issuing negotiable certificates with large-amount deposits, and the pilot issuance of negotiable certificates with large-amount deposits shall be realized in the Pilot Zone.
20. When the conditions are met, the upper limit on interest rates of small-amount deposits in foreign currencies under common accounts in the Pilot Zone shall be relaxed.
VI. Deepen Reform of Foreign Exchange Administration
21. Support the Pilot Zone to develop headquarters economy and new trade. It is imperative to expand the scope of pilot enterprises for consolidated operation and management of foreign exchange funds of transnational companies’ headquarters, further simplify the management of fund pool in foreign currencies, deepen the pilot program of foreign exchange administration by international trade settlement centers, and facilitate the trade and investment.
22. Simplify the procedures for foreign exchange registration of direct investment. The procedures for foreign exchange registration and change registration under direct investment shall be delegated to banks for processing, and the subsequent regulation shall be strengthened. On the premise of ensuring the authenticity of transactions and complete collection of data, the foreign exchange funds under direct investment in the Pilot Zone may be settled at will.
23. Support the Pilot Zone to carry out overseas lease service. The examination and approval transaction by transaction for the overseas creditors’ rights business of financial lease companies such as overseas lease shall be cancelled, and the registration administration shall be implemented. Upon approval, the financial lease companies and Chinese financing lease companies are permitted to charge rentals in foreign currencies for domestic financing lease, and the procedures for prepayment for large financing lease projects such as lease of aircrafts and vessels shall be simplified.
24. The approval upon payment of guarantee fees by the entities in the Pilot Zone to overseas entities shall be cancelled, and the entities in the Pilot Zone may directly handle the procedures with the banks for purchase of foreign exchange and payment of the guarantee fees.
25. Improve the administration of foreign exchange settlement and sale, and support the banks to carry out the over-the-counter transactions of bulk commodity derivatives for domestic clients.
VII. Monitoring and Administration
26. The financial institutions and specified non-financial institutions in the Pilot Zone shall, in accordance with laws and regulations, conscientiously perform their obligations to prevent money laundering, terrorist financing and tax evasion, submit the balance sheets and relevant business information to the People’s Bank of China and other financial regulatory authorities ina timely, accurate and complete manner, and compile and declare international balance of payment statistics in accordance with the relevant provisions; such institutions shall also cooperate with the financial regulatory authorities to pay close attention to abnormal flowing of cross-border funds.
27. Shanghai Municipal People’s Government may establish the monitoring platform of general information in the Pilot Zone, so as to monitor and regulate the non-financial institutions in the Pilot Zone. The non-financial institutions in the Pilot Zone may be appraised on an annual basis, and they may be classified for the purpose of administration based on the appraisal results.
28. The business of separate accounting units in the Pilot Zone shall be included into the calculation of capital adequacy ratio of their bank as legal entity. The liquidity shall be managed under the principle of self-balance and may be provided by the bank at the higher level if necessary.
29. The macro-prudence financial administration shall be adopted in the Pilot Zone. The People’s Bank of China may, based on the actual situation, strengthen the regulation over the flowing of short-term speculative capital in the Pilot Zone, and may even take temporary prohibitory measures. The communication and coordination with other financial regulatory authorities shall be strengthened, so as to ensure timely and adequate sharing of information.
30. The People’s Bank of China will, under the principles of controllable risks and stable progress, formulate the relevant detailed measures and then organize their implementation, and ensure consistency with the prudent management requirements made by other financial regulatory authorities.
The People’s Bank of China
December 2, 2013
