Bank executive: Liberalisation adds to Shanghai FTZ diversity

Further financial liberalization in the Shanghai Free Trade Zone (FTZ) will lead to more cross-border business in the Chinese currency and offer diverse financial services for clients, said the Shanghai chief of Standard Chartered on Friday. Companies registered in the zone - a test bed for upgrading China's regulatory environment, financial and service sectors - are able to access an increasing number of cross-border services facilitating trade, financing and cash management through banks, said Loh Long-hsiang, the Shanghai general manager of Standard Chartered. Loh was speaking on the sidelines of a forum marking the bank's presence in the zone. "Financial services and products available for our onshore clients are not as diverse as what have been offered in developed markets," Loh said. "We hope to introduce a broader range of financial services to Chinese companies through our sub-branch in the Shanghai FTZ." The bank's sub-branch offers cross-border Renminbi solutions for companies in the zone after China's central bank announced a spate of policies supporting the expanded cross-border use of the Chinese currency. Standard Chartered said in a statement that the new sub-branch offers both yuan and foreign currency services, with a focus on cash management, settlement, cross-border financing and risk management. In February, the bank pioneered the first two-way non-quota-based cross-border yuan sweeping services for Baoxin Auto Group, without having to seek regulatory approvals. A number of Chinese and foreign banks have started offering cross-border yuan services such as the pooling and sweeping of yuan funds between company's onshore and offshore entities, as well as off-shore yuan financing. Such services have given banks and multinational firms greater flexibility in deploying funds globally and promote the use of the Chinese currency beyond the mainland and Hong Kong, which so far accounts for the majority of offshore yuan transactions. Enabling the Chinese currency to flow freely across Chinese borders in the FTZ could also add to Shanghai's appeal as a new regional treasury center for corporates. Loh said while some of the bank's clients are keen to learn the progress of Renminbi's cross-border use in the zone, they will decide whether to access such services in Shanghai or other established regional treasury centers such as Hong Kong and Singapore based on a comparison over the ease of procedures, costs and operational needs. Loh said financial reforms within the zone have provided opportunities for the bank to introduce to China-based clients financial services widely practiced in other markets. But the executive also suggested prudence in pushing such reforms, as he cautioned against liberalizing capital control without effectively managing associated risks. The Shanghai head office of China's central bank announced in February details on how banks do yuan-related business in the zone. It dictated the amount of offshore yuan loan firms registered in the FTZ can borrow based on a formula and the usage of such funds. The central bank also cleared the way for two-way cross-border yuan pooling and cross-border yuan payment through third party payment firms. Dai Haibo, deputy administrator of the Shanghai FTZ administration committee, said on Tuesday at press conference on the zone's half-year anniversary that cross-border yuan business has seen fast growth following authorities' support and regulatory easing. Dai cited central bank statistics showing cross-border yuan transactions topped 10 billion yuan in January, up 53.98 percent year on year. The volume dropped slightly below 10 billion in February but recorded year-on-year growth of 156.93 percent.