Banks introduce new free trade accounts for FTZ companies
Print Edition
FIVE banks in Shanghai have begun offering free trade accounts for companies in the city’s pilot free trade zone ahead of further capital market reforms in the area.
The accounts — provided by the Bank of China, the Industrial and Commercial Bank of China, China Construction Bank, Shanghai Pudong Development Bank and the Bank of Shanghai — will make the process of cross-border money transfers much easier for both domestic and foreign firms, the Shanghai headquarters of the People’s Bank of China said in a statement yesterday.
China Merchants Bank and the Bank of Communications have also been approved to offer the accounts, but have yet to do so, it said.
The accounts are seen as a precursor to further financial reforms in the FTZ. Holders will in theory be allowed to move local and foreign exchange funds into and out of China without being subject to the strict capital controls that apply outside the FTZ, according to the central bank’s blueprint unveiled in December.
“The free trade accounts will simplify yuan transfers under direct foreign investment and current accounts,” said Zhang Xuhong, general manager of the Bank of Shanghai’s international business department.
“They are like an expressway for financial reforms in the zone,” he said. “And when banks are allowed to handle foreign currency transactions through the accounts, they will be even more useful.”
The PBOC said last month that the introduction of foreign currency services will be considered in six months’ time, after the monetary authority has completed an assessment of the new accounts.
Individuals working in the FTZ will also be allowed to open free trade accounts to handle cross-border investments, though this is pending the creation of an identification system, bank officials said.
Insurance firms and brokerages are also working to set up a free trade account system to help clients handle their cross-border business, the central bank said.
Meanwhile, the Shanghai Gold Exchange yesterday signed an agreement with the central bank to allow foreign clients and companies in the zone to invest in gold via free trade accounts.
Allowing the international trade of gold in Shanghai could increase China’s pricing power and reinforce the city’s position as an international financial center, said Xu Luode, secretary-general of the exchange.
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