Clifford Chance

New rules facilitate cash flow in the Shanghai Free Trade Zone

2 April 2014

In order to further realise financial deregulation in the Shanghai (China) Pilot Free Trade Zone (Shanghai FTZ), the Shanghai Head Office of the People's Bank of China Shanghai Head Office and the Shanghai Office of the State Administration for Foreign Exchange have Shanghai Office issued rules in December 2013 and February 2014 respectively to facilitate cross-border trade and investment activities and relax foreign exchange administration.  In general, these rules have streamlined administrative procedures such that payment for trade and direct investment is now expedited for companies within the Shanghai FTZ.  Payment could now generally be processed via bank accounts without the need for prior government filing or approval.  In addition, rules on foreign exchange registration, lump sumdiscretionary capital funds settlement and lending offshore by companies in the Shanghai FTZ are now less restrictive, as are rules on their provision of foreign security and offshore borrowing.  Companies in the Shanghai FTZ further enjoy simpler requirements on multinational foreign exchange cash pooling and a more relaxed regime for finance leasing.  Certain banks with derivatives licences may also provide commodity hedging services to their clients within the Shanghai FTZ without the need for prior SAFE approval.  This briefing summarises and discusses the implications of the above relaxations, and urges the further release of detailed rules that may effectively open up the financial market within the Shanghai FTZ.

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