Date
24 August 2017
Chinese Yuan Bank Note Images

The Big Picture: OFFSHORE RMB CENTER

Residents in the Shanghai free trade zone will be allowed to open special bank accounts which can, among other things, be used for cross-border financing and guarantee businesses, the People’s Bank of China (PBoC) said on Monday. 

They can transfer funds between these bank accounts and others located elsewhere in China outside the free trade zone but such transactions would be treated as cross-border capital flow, the central bank said in a statement posted on its website. Within the zone, they can transfer money with other bank accounts opened by non-residents. 

In the zone, individuals who fulfill certain requirements can buy overseas investment products including stocks while foreigners can buy Chinese investment tools including stocks, the PBoC said. Financial companies and corporates there can borrow money from overseas, although such funds cannot be invested in the nation’s stocks and derivatives.

Market observers say such arrangement would mean that the zone would effectively function like an offshore renminbi center by creating a firewall between it and the rest of China. The large amount of capital inflow to the free trade zone will not stoke inflation but can help boost cross-border trade, they say.

The central bank’s latest policy moves will inevitably intensify the competition between the zone and Hong Kong as both places aim to serve as major business hubs for multinational firms in Asia. The zone may also become a major renminbi fundraising center over the medium term by creating an offshore renminbi bond yield curve.

However, the road for opening up the nation’s capital accounts will remain bumpy as the central bank needs more time to make sure that the latest arrangement will not cause problems such as money laundering, tax evasion and disturbance of the Chinese capital market.

Cameron seeks Chinese investment

British Prime Minister David Cameron said on Monday that the United Kingdom welcomes Chinese capital into infrastructure and nuclear power projects, the Securities Times reported Monday. During an official trip to China, Cameron also said Beijing’s effort to expand domestic consumption presents enormous business opportunities for British firms. The British leader, who met Chinese President Xi Jinping during his visit, said the UK is willing to enhance cooperation with China on regional and international issues in a bid to promote the steady recovery of the global economy. 

RMB clearing services to debut in UK

Agricultural Bank of China and Standard Chartered Bank will offer renminbi clearing services in Britain, Xinhua news agency reported Monday. The two signed an agreement to carry out renminbi transactions, becoming the first lenders to offer such services in the United Kingdom. At present, RMB clearing is done through a real time gross settlement system in Hong Kong with clearing banks in Taiwan and Singapore or through agent banks in China. 

–Contact HKEJ at [email protected]

JP/AC/RC

 

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