Introduction for Financial Services in China (Shanghai) Pilot Free Trade Zone Mar.2014
Contents I II About Shanghai FTZ Opportunities For FTZ Company III ICBC Preparation and Capability
Part I. About Shanghai FTZ
About Shanghai FTZ 28.78square km. 4 customs supervision areas Shanghai Waigaoqiao Bonded Zone Waigaoqiao Bonded Logistics Zone Yangshan Bonded Port Shanghai Pudong Airport Free Trade Zone Background of FTZ In respect of the international trend, FTZ is inspired by the multilateral talks initiated by America and other western countries such as TPP(Trans -Pacific Partnership), TTIP(Transatlantic Trade and Investment Partnership) and BT(Bilateral Trade). It is also expected to be a way for China to adapt itself to the world trade transformation. Domestically speaking, the establishment of FTZ is a significant measure to promote China's economic growth, to boost China's reform and opening up under the new circumstances, to positively impel the mechanism innovation and to facilitate the economic development reform.
FTZ Policy PBOC's Financial Guideline(30 articles) Dec. 2nd, 2013 Financial Guideline for China (Shanghai) Free Trade Zone A separate account management system will be established for convertible transactions under capital items in the pilot zone. Therefore, an open but macro prudential policy framework for financial services will be gradually set up. Promote crossborder RMB settlement Facilitate Investment & Financing Promote interest rate liberalization Deepen FX management reform Separate Account Management System
FTZ Policy PBOC's Financial Guideline(30 articles) Dec. 2nd, 2013 Financial Guideline for China (Shanghai) Free Trade Zone FTE Domestic Entity Account System Basic Account FTI Domestic Individual FTA Free Trade Account Normal Account Current Account FTN Foreign Entity FTF Foreign Individual NRA Special Account Rules for remittance Funds can be freely transferred between FTA accounts and offshore accounts, NRA accounts in China, non-resident FTA and other free trade accounts. The funds in the FTA account and the non-fta account of a company with the same account name can be transferred in between when the entity has the needs for goods or services payment (hereinafter referred to as under current items), loans repayment, industrial investment and other compliance cross-border business. The funds transfer between resident FTA and onshore settlement accounts outside the free trade zone will be regulated as cross border business.
FTZ Policy 10 Articles about promoting cross-border RMB settlement In normal accounts Feb.20, 2014 The Notice of Promoting Cross-border RMB Settlement in China (Shanghai) Pilot Free Trade Zone RMB overseas financing:financial institutions and companies in FTZ may borrow RMB from overseas. Maximum Amount: Paid-in Capital X 1 X macro prudence parameter Paid-in Capital X 1.5 X macro prudence parameter (for FTZ Co.) (for FTZ Financial institutions) Usage:The funds can be used in FTZ company s production and operation or overseas or project constructions in the zone, but cannot be used for security investment, derivatives transactions or entrustment loan. Tenor: Over 1 year (inc.) Account management:special account applying to current interest rate. Cross-border RMB settlement under current and direct investment items: Based on the 3 principles for business conduction----know Your Customer, Know Your Business, Due Diligence, the bank can do the cross-border RMB transactions for the companies according to their payment order. Conduct E-commerce cross-border RMB Settlement
FTZ Policy 10 Articles about promoting cross-border RMB settlement Feb.20, 2014 The Notice of Promoting Cross-border RMB Settlement in China (Shanghai) Pilot Free Trade Zone What FTZ Companies can do with the normal accounts. Cross-border RMB Cash Pool: Main requirement:the company s H.Q. should authorize one subsidiary in FTZ as the head of the cross-border RMB cash pool to conduct the funds collection among the member companies at home and abroad. (All the companies who have capital relationship with the holding or sub-holding company can participate into the scheme, no matter that s a parent company, a subsidiary or a joint stock company. Collection requirement:the cash flows of the company s daily operation and investment can be collected for use but the cash flow from financing cannot be directly collected. Account requirement : The company should choose one bank in Shanghai to open an RMB special account as the master account of the cash pool. RMB Centralized payment: Main requirement:the FTZ Co. can do cross-border RMB centralized payment business under current items with the domestic and overseas affiliates. (The affiliates can be the companies who have capital relationship within the group, companies on the supply-chain, or those who have frequent trade business.) Account requirement : The company should choose one bank in Shanghai to open an RMB special account as the master account for centralized payment.
FTZ Policy By-law of Foreign Exchange Management FTZ Company Feb.26, 2014 By-law of the Foreign Exchange Management in China (Shanghai) Pilot Free Trade Zone Implementation Details Under current items: Apply simplified bill checking procedures to FTZ companies for FCY incoming and exchange, FCY purchase and payment based on the three principles for business conduction. Allow the leasing companies in FTZ to have rents in FCY from domestic tenants. Qualified companies in FTZ can do centralized payment and netting through the domestic master account of cross-border FCY cash pool. Under capital items: Registration and adjustment for direct investment can be done directly in the bank The foreign invested companies may exchange FCY to RMB at will and do payment with real business background. The maximum amount for overseas lending for companies in FTZ is adjusted from 30% equity to 50% equity. The overseas guarantee is managed by SAFE through registration in advance instead of approval case by case.
FTZ Policy Policies Made by 3 Commissions CBRC(China Banking Regulatory Commission) 1. Support the development of Chinese banks. 2. Support the establishment of non-bank financial institutions. Support qualified corporate groups to set up finance companies, automobile financial companies and consumer finance companies; support trust companies in Shanghai to move into the FTZ; support national financial asset management companies to set up branches in the FTZ; support financial leasing companies to set up subsidiaries in the FTZ. 3. Support the development of foreign banks. Qualified foreign banks can set up subsidiaries, branches, specialized institutions and Sino-foreign joint-venture banks in the zone. 4. Support private capital to enter the banking sector. Support qualified private capital to set up private-owned banks, financial leasing companies, consumer finance companies and other financial institutions at their own risks. 5. Encourage cross-border investment and financing services. Support banking institutions in the FTZ to develop cross-border financing services, including but not limited to: commodity trade financing, supply chain trade financing, offshore shipping financing, modern service sector financial support, domestic loans under overseas guarantee, commercial paper, etc. Support banking institutions in the FTZ to carry out crossborder financial services, including but not limited to: cross-border M&A loans, project loans, overseas loans under domestic guarantee, cross-border asset management and wealth management, real estate trust and investment funds, etc. 6. Support the development of offshore business. Qualified Chinese-funded banks can conduct offshore banking business in the FTZ. 7. Simplify access procedure. 8. Improve regulatory service system. Optimize the calculation methods and regulatory requirements for certain indicators, such as the loan-to-deposit ratio and liquidity.
FTZ Policy Policies Made by 3 Commissions CSRC(China Securities Regulatory Commission) 1. The CSRC will consent to the founding of the Shanghai International Energy Trading Center Co., Ltd. (the Company) in the FTZ by the Shanghai Futures Exchange. The Company will be responsible for enhancing the establishment of a trading platform of international crude oil futures. Foreign investors will be fully introduced to participate the domestic futures trading based on the platform. 2. The CSRC supports qualified entities and individuals in the FTZ to make investments in foreign and domestic securities and futures markets in accordance with relevant regulations. Financial institutions and enterprises in the FTZ may carry out investments and trading in securities and futures exchanges of Shanghai in accordance with relevant regulations. Qualified foreign individuals who are employed in the FTZ may set up special nonresident individual accounts with securities and futures institutions in the FTZ to carry out investments in domestic securities and futures market in accordance with relevant regulations. Qualified financial institutions and enterprises in the FTZ and qualified individuals who are employed in the FTZ may carry out investments in foreign securities and futures market in accordance with relevant regulations. 3. Foreign parents of enterprises in the FTZ may issue RMB bonds in domestic markets in accordance with relevant regulations. Depending on the market needs, the CSRC will explore to introduce the trading of international financial assets in the FTZ. 4. The CSRC supports securities and futures institutions to register and set up specialized subsidiaries in the FTZ. Currently, institutions like Haitong Futures, Hongyuan Futures, GF Futures, Shenyin & Wanguo Futures and HuaAn Funds are setting up or preparing to set up risk management subsidiaries and assets management subsidiaries in the FTZ. 5. The CSRC supports securities and futures institutions in the FTZ to carry out over-the-counter ( OTC ) transactions of commodities and financial derivatives for domestic clients.
FTZ Policy Policies Made by 3 Commissions CIRC(China Insurance Regulatory Commission) 1. Establishment of foreign-invested specialized health insurance institutions in the FTZ; 2. Establishment of FTZ branches by insurance companies, development of cross-border RMB-denominated reinsurance business in the FTZ, and research on catastrophe insurance system by the CIRC Shanghai Bureau; 3. Outbound investment pilot by FTZ insurance institutions, and research for expanding the scope of permitted outbound investments and relaxing the relevant outbound investment restrictions for FTZ insurance institutions; 4. Subject to the relevant laws and regulations, carrying out business in the FTZ by world-known specialized insurance intermediaries as well as social organizations or individuals engaged in reinsurance business to provide support for the development of insurance industry; 5. Development of shipping insurance business in Shanghai, including development of shipping insurance institutions and shipping insurance brokers; and development of the Association of Shanghai Shipping Insurance; 6. Innovation in insurance products by insurance companies, and continuous expansion of the service scope of liability insurance business; 7. Improvement of the insurance market system in Shanghai, and promoting the establishment of functional insurance institutions such as shipping insurance pricing center, reinsurance center, insurance fund management center, etc.; and 8. Establishment of a mechanism linking the FTZ financial reform and innovation with the building up of Shanghai International Financial Center, and continuously strengthening and enhancement of the cooperation between the CIRC and Shanghai Municipal Government.
II. Business Opportunities
Business Opportunities Why you'd better have an FTZ company? Benefit from the H.Q centralized capital management pilot facing to the MNC in the zone, facilitating the cross-border cash flow, thus promoting the establishment of the global capital management center. Realize the cross-border centralized payment, flexible currency conversion and capital exchange to RMB at will. Enhance the capital gains by making use of the interest rate liberalization on the financial market. Efficient funds transfer. To realize the RMB and FCY funds transfer between FT- accounts and with overseas accounts. Set up an operation center which boasts the functions of trade, logistics, settlement, etc. Realize the integrated development of domestic and international trade by making efforts on both side. Participate into the global trade via the international commodities trading and capital allocation platform in the pilot zone. Trade Platform Capital Management Platform Investment& Financing Platform FDI projects can be done more efficiently by adjusting the previous approval procedures to filing. Reduce the financing cost by utilizing funds from the banks in FTZ or overseas, i.e. making use of the better capital resource and market at home and abroad. Take advantage of the foreign debt management reform in the zone,thus facilitating the cross-border financing within the group.
Business Opportunities Cross-Border RMB Cash Pool Product Advantages: Facilitate the allocation and management of the funds at home and abroad through bidirectional cross-border RMB communication. Realize integrated cash management with centralized RMB netting payment and collection. Flexibly use money within the cash pool to relieve the funds lack of member companies thus reducing the financing cost. ICBC Advantages: ICBC is the first commercial bank in domestic China to have the unified and almighty system which helps us to realize the efficient and integrated settlement and clearing worldwide in ICBC system. We have advanced system security and technical support for cash management services. ICBC helps to do the automatic declaration restore under centralized payment and netting settlement. ICBC is the pioneer of this business among the commercial banks thus we have abundant experience in solution presentation and operation. Overseas FTZ Domestic China outside FTZ Counterparty At present funds sweep within total amount of net cash flow from operation and investment of overseas member companies of latest FR FTZ $ Overseas affiliates $ FX RMB A/C Esp. for overseas funds collection RMB A/C Esp. for domestic funds collection Domestic affiliates/domestic cash pool
Business Opportunities RMB overseas financing Product Advantages: Use offshore RMB funds to diversify the capital recourse of RMB financing. Make use of the overseas financing interest rate to reduce the financing cost. ICBC Advantages: We have nearly 400 overseas institutions in 40 countries and regions all over the world and have established correspondent relationship with over 1700 foreign banks in 145 countries and regions. Therefore we have more financing recourses for you to choose. ICBC use the advanced Global Credit Management (GCMS) system to provide technical support to loan supervision, which accelerate the loan approval with a higher quality. Two modes can be chosen as in the chart to promote the overseas financing business. Overseas Intermediary Mode Funding FTZ Domestic China outside FTZ Overseas institutions FTZ Co. Customer recommendation Shanghai Branch
Business Opportunities RMB overseas financing Product Advantages: Use offshore RMB funds to diversify the capital recourse of RMB financing. Make use of the overseas financing interest rate to reduce the financing cost. ICBC Advantages: We have nearly 400 overseas institutions in 40 countries and regions all over the world and have established correspondent relationship with over 1700 foreign banks in 145 countries and regions. Therefore we have more financing recourses for you to choose. ICBC use the advanced Global Credit Management (GCMS) system to provide technical support to loan supervision, which accelerate the loan approval with a higher quality. Two modes can be chosen as in the chart to promote the overseas financing business. Overseas FTZ Domestic China outside FTZ Risk Participation Mode Overseas institutions 3.Funding FTZ Co. 2.Credit backup 1.Guarantee application Shanghai Branch
Business Opportunities Cross-border FCY Cash Pool What feature the product The funds in the international master account is not calculated into the foreign debt quota. The foreign debt of the domestic affiliates can be flexibly allocated. Enjoy the favorable policy of centralized payment and collection, netting, etc. ICBC Advantages: We have nearly 400 overseas institutions in 40 countries and regions all over the world with a wide scope of services for overseas customers. ICBC is the first commercial bank in domestic China to have the unified and almighty system which helps us to realize the efficient and integrated settlement and clearing worldwide in ICBC system. We have advanced system security and technical support for cash management services. Overseas FTZ Domestic China outside FTZ Counterparty Foreign debt quota $ FTZ Co. FTZ Co. Overseas Affiliates $ International master A/C Domestic master A/C $ Affiliates Quota for lending 50% equity of the domestic affiliates
III. Preparation and ICBC Capability
Our preparation Preparation and ICBC Capability Official Inauguration of China(Shanghai) Pilot Free Trade Zone and Administrative Commission of China(Shanghai) Pilot Free Trade Zone Official Inauguration of ICBC China (Shanghai) Pilot Free Trade Zone Branch Vice President Mr. Gu Guoming attended the initial ceremony of the cross-border RMB business for payment institutions Mr. Shen Liqiang, president of ICBC Shanghai Branch, together with Mr. Ma Hong, deputy director of Shanghai Financial Services Office, unveiled the nameplate of ICBC China(Shanghai) Pilot Free Trade Zone Branch. ICBC China(Shanghai) Pilot Free Trade Zone Branch signed the cooperation agreement with four corporate groups.
Preparation and ICBC Capability ICBC Capability ICBC, boasting the world s leading banking system, is the first among the large commercial banks to utilize the unified and comprehensive system in domestic China. Centralized processing of all currencies and a unified global platform enable us to provide you with efficient and high-quality transaction performance. The system will be optimized in line with the requirement of FTZ so as to satisfy all needs for business processing. ICBC pilot FTZ branch was officially inaugurated on Sep.29,2013. We have already formed a professional team especially for FTZ policy research, product designing to provide our clients with professional services at the first time. Supportive System Professional Service Abundant Products Global Network We ve already set up a comprehensive product line to meet the needs of various industries in terms of account management, daily settlement, financing, liquidity management, data provision, etc. We have designed 45 financial service items especially for FTZ business in terms of settlement, financing, investment and transactions. We have established a global operation network across Asia, Africa, Europe, America and Australia with 17,000 domestic branches, nearly 400 overseas institutions and over 1,700 correspondent banks in 145 countries. With the establishment of Shanghai FTZ, ICBC will make use of our global network to facilitate customers clearing and remittance, thus satisfying our customers with international and unified services.
Preparation and ICBC Capability Abundant financial service experience in FTZ RMB overseas financing Shanghai Baosteel International Trading Company SINOPHARM GROUP CO.LTD. Cross-border RMB cash pool Wilmar Shanghai Baosteel International Trading Company ITOCHU Shanghai Ltd. Overseas M&A Asset Management Commodity Derivatives Shanghai Xian Dai Architectural Design (Group) Co., Ltd Shanghai Waigaoqiao Free Trade Zone Development Co., ltd. Shanghai Fengyi International Trading Co., Ltd
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