Foreign currency services officially commence in China’s Shanghai Free Trade Zone

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China’s Shanghai Free Trade Zone

The Chinese financial markets economy is admittedly highly attractive but it has largely still remained virtually impenetrable to the outside world. This is gradually yet slowly changing and a major step towards creating the much sought after accessibility to China came when yesterday the Chinese authorities have officially commenced foreign currency services under free trade accounts in the Shanghai Free Trade Zone.

This move represents a very welcome step towards the free trade of the yuan under capital accounts, while it is also expected that by using this service companies can benefit from a reduction in their foreign exchange costs.

The Shanghai Free Trade Zone is a very significant region fast becoming the focus for overseas firms wishing to participate in Chinese business from within the mainland and this is why last May the Chinese government officials decided the piloting of the centralized operation of FX funds in this Trade Zone. When this was announced back then the operation of free trade accounts was only available to non-banking institutions, and such free trade accounts were subsequently made available in yuan, but the indication was that within six months foreign-currency business was going to be launched as well.

According to local officials during the present piloting scheme that has just started, the Shanghai Free Trade Zone will also start a trial program for qualified individual investors to invest abroad, while within the current year limited amounts of the yuan will be permitted to be used for free conversion.

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