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Best cases for financial innovation in FTZ
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SHANGHAI Financial Services Office has unveiled the fourth batch of cases that highlighted financial innovation achieved in the city’s pilot free trade zone.
It comprises eleven case studies illustrating how companies have taken advantage of financial reforms in the zone to expand fundraising channel and facilitate trade and investment, the office said.
Shanghai Huarui Bank, the first private bank registered within the zone, was selected for joining hands with venture capital companies to explore ways to aid high-growth small businesses in funding difficulties.
The bank offered a 50-million-yuan (US$7.8 million) loan to Loukou.com, an entrepreneurial Internet firm based in Zhangjing High-Tech Park, with equity options as collateral.
“Due to limitation of traditional ways of risk management, it’s difficult for startups that have great growth potential but haven’t been able to turn a profit to get loans from commercial banks,” said Xie Qiang, assistant president and chief risk officer of Huarui, “With FTZ policies, we can team up with venture capital firms to assess investment value and growth prospect of a borrower and thus mitigate risks.”
Another case the office shared was the launch of the Shanghai-Hong Kong Gold Connect. It’s a trading link between Shanghai Gold Exchange and the Hong Kong-based Chinese Gold and Silver Exchange Society that allows Hong Kong investors to directly participate in Chinese mainland spot gold trading.
A number of banks were selected for expanding the function of the free trade account system in the zone. Bank of China raised 4 billion yuan from offshore markets by issuing certificates of deposit through its Hong Kong branch and then lent the fund to its zone-based branch to boost the liquidity of its free trade account system.
“These cases underscored the progress of financial liberalization in the zone and also provided experience for further reform,” said Jin Xingming, deputy secretary-general of the Shanghai Municipal Government.
By the end of June, the zone-based companies have opened nearly 20,000 free trade accounts with 30 financial institutions, official data showed. Cross-border settlement in both domestic and foreign currencies via free trade accounts have amounted to 2 trillion yuan.
Brokerages including Guotai Junan Securities and Haitong Securities will soon be approved to open free trade accounts for clients, said Jin.
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