Date
23 September 2017

FTZ RMB cross-border payment boosts third-party platforms

At first glance it looks just like what hundreds of millions of Chinese e-shoppers do everyday: you go to a cyber store and choose the items you want to buy, add them to your cart, check out on the payment page, input your account details and password, and confirm the payment.

But this particular e-shopping demo, which attracted a dozen journalists and representatives from banks and third-party payment service providers at the end of last month, had a little difference. The deal was made inside the Shanghai pilot free trade zone (FTZ), the e-shopping website is based outside the mainland and the payment was settled directly in renminbi, the Southern Weekend reports.

The cross-border direct renminbi payment was made possible after the People’s Bank of China (PBoC) issued a set of guidelines that dramatically simplified the procedures for renminbi payment operators to just two basic requirements: a third-party payment license issued by the PBoC and a domicile in the FTZ or a subsidiary currently operating there.

In another demo, a trading company incorporated in the FTZ ordered 140,000 yuan (US$22,711) worth of fruits from a Taiwan exporter and the payment, in renminbi, was made within a minute under the FTZ trade settlement scheme. The fruits were expected to arrive at Shanghai’s Waigaoqiao port within five days.

Previously, the whole process would take 15 days as the importer had to go to a bank branch for a raft of procedures and paper work and must remit the money in US dollars. By the time the shipment arrived, some of the fruits were already spoiled.

But under the new system, an importer avoids foreign exchange hassles, enjoys much faster payment processing and benefits from lower transaction costs.

Bank of China’s Shanghai FTZ branch and 99Bill.com are now trialing the renminbi cross-border e-transaction system to facilitate instant payment of deals worth 200,000 yuan or below. The pair has approached a number of overseas food and consumer goods exporters, including that Taiwan fruit exporter, to take part in the service.

In 2009, the State Council chose Shanghai and four cities in Guangdong province — Guangzhou, Shenzhen, Zhuhai and Dongguan — for the trial, and included more cities and provinces in the succeeding years.

Local authorities had drawn up a shortlist of candidate companies, which became eligible to join the scheme after securing approvals from the PBoC, Ministry of Finance and Ministry of Commerce.

Renminbi trade settlement is for big companies, but this direct renminbi cross-border payment scheme, which has a much lower threshold, suits the needs of small e-commerce players, especially those engaged in consumer-to-consumer business or cross-border trades in small amounts.

As third-party payment platforms play an integral role in the e-commerce sector, shopping overseas online with renminbi is a great way for them to tap new income streams.

Many e-payment start-ups are headquartered in Shanghai and have subsidiaries in the FTZ, allowing them to enjoy first mover advantage, while banks that have yet to open their FTZ branches will naturally choose to link up with them.

Shanghai official mouthpiece Jiefang Daily noted that Shanghai branches of a number of lenders including Bank of China (03988.HK, 601988.CN), Industrial and Commercial Bank of China (01398.HK, 601398.CN), China Construction Bank (00939.HK, 601939.CN), China Merchants Bank (03968.HK, 600036.CN) and China Minsheng Bank (01988.HK, 600016.CN) have joined hands with third-party payment platforms including 99Bill.com, ShengPay, UnionPay, All In Pay and EasiPay to take advantage of the policy loosening.

The trial launch of the cross-border renminbi payment system could just be a prelude to more financial reforms in the FTZ, spurring other fresh opportunities.

– Contact the writer at [email protected]

CG

 

 

EJ Insight writer

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