Firms in FTZ get the nod to borrow yuan from offshore
Print Edition
Shanghai’s free trade zone received a boost yesterday after the central bank released details of financial innovations, including allowing companies registered in the zone to borrow yuan from offshore.
Non-banking financial institutions and other companies in the zone will be allowed to borrow limited amount of yuan from abroad, according to a statement by the Shanghai headquarters of the People’s Bank of China yesterday.
The money can be moved onshore but it has to be deposited into a separate bank account in the FTZ, the statement said. Companies can only use the funds for business operations in the zone or abroad.
A company’s category and registered capital will be taken into account when it borrows funds from abroad.
Singapore branches of the Industrial and Commercial Bank of China and the Bank of China have offered a combined 270 million yuan (US$44.41 million) of credit to three companies in the zone, the banks said.
The move will expand cross-border money flow and will benefit companies in the FTZ to access cheaper yuan funding from abroad, ICBC said in a statement yesterday.
Shanghai is only the second city on China’s mainland which allows offshore yuan lending.
In 2012, companies in Qianhai area in China’s southern Shenzhen City were granted permission to borrow yuan from Hong Kong banks.
The central bank also announced other ground-breaking measures, including allowing companies in the zone to start two-way yuan cash pooling businesses to enhance money management efficiency.
The China Gold Exchange and the China Foreign Exchange Trading System will be allowed to offer cross-border yuan-denominated services in the zone.
The latest document by the central bank is a follow-up of a financial reform blueprint unveiled in December last year.
It has outlined series of tasks including piloting convertibility of capital account, simplifying cross-border money flow, conducting market-oriented reforms of interest rate, and relaxing foreign exchange controls.
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