The China (Shanghai) Pilot Free Trade Zone (“SFTZ”) was launched in September 2013 and is being used as a testing ground for a range of economic and social reforms. The objectives of the SFTZ are to explore the impact of new policies aimed at “opening-up” China (including further internationalisation of the RMB), accelerate government transformation and promote economic reform and stable growth initiatives.
The People’s Bank of China has provided a blueprint for China’s financial reform using the SFTZ which includes:
- Establishing a simplified bank account structure to facilitate financial reforms
- Promote cross border investments and financing activities to achieve ultimate convertibility of the RMB under capital accounts
- Expand the cross-border use of RMB
- Gradually implement market-determined interest rates
- Relax foreign exchange control
The SFTZ is also becoming a commodity trading hub for the region and in September 2014, the International Board of the Shanghai Gold Exchange opened to global investors. Further exchanges are likely in the future which will increase demand for RMB denominated commodity products.
The SFTZ has to date proven quite popular with over 23,000 companies establishing a presence in the zone and looking to take advantage of the more liberal regulations and operating requirements. Developments in early 2015 around offshore borrowing have given corporates significantly more flexibility to source cheaper offshore funding in both RMB and foreign currency, although RMB is given more favourable treatment. Also, while two-way RMB and foreign currency cash pooling is permitted nationwide in Mainland China, the SFTZ has preferential rules relative to the rest of China.
ANZ China has a sub-branch in the SFTZ which was established in April 2014. The sub-branch is an open platform for ANZ China and our international network to serve clients and explore business opportunities in the SFTZ. ANZ can support a number of capabilities in the SFTZ including:
- Term lending
- Entrustment loans
- Payments and clearing
- Cash and liquidity management, including cash pooling and sweeping facilities
- Foreign exchange trading and hedging products
- Commodities trading and hedging products