According to the website of the People's Bank of China on April 21, recently, the People's Bank of China, the State Administration for Financial Regulation, the State Administration of Foreign Exchange, and the Shanghai Municipal People's Government jointly issued the "Action Plan for Further Improving the Facilitation of Cross-border Financial Services in Shanghai".

Source: People's Bank of China website

Source: People's Bank of China website

The Action Plan aims to better play the special role of Shanghai International Financial Center in serving the construction of a new development pattern, and supports all types of entities to participate in international competition and cooperation more safely, conveniently and efficiently. It proposes 18 key measures from five aspects: improving cross-border settlement efficiency, optimizing exchange rate hedging services, strengthening financing services, strengthening insurance protection, and improving comprehensive financial services , which is of great significance to Shanghai's acceleration of the construction of an international financial center.

Improve foreign exchange risk management and response capabilities

The Action Plan proposes that by deepening financial institutional opening up, strengthening finance’s support capabilities for “going out” enterprises and the construction of the “Belt and Road”, a financial system that is more adaptable to the outward-oriented economy and enhancing the competitiveness and influence of Shanghai’s International Financial Center.

Focusing on improving cross-border settlement efficiency and facilitating global fund management of enterprises, the "Action Plan" clearly states that foreign exchange business management models and business development processes will be optimized. Support banks to implement foreign exchange business management measures, implement foreign exchange business process optimization and system reconstruction, classify foreign exchange compliance risk levels for enterprises and provide differentiated and convenient financial services. Support the Shanghai branches of Bank of China, CITIC Bank, China Minsheng Bank, Citibank (China) Co., Ltd. and other pilot banks to carry out business in accordance with the new regulations, and support more Shanghai banks to participate. Establish a pilot bank’s due diligence exemption declaration and evaluation mechanism, support banks to report suspected violations, rely on the foreign exchange market self-discipline mechanism to conduct evaluations, reasonably determine the bank’s “duty and responsibility” situation, and improve the quality and efficiency of cross-border financial services.

Promote financial institutions to improve their digital services. Banks are encouraged to carry out cross-border authentication and electronic identification of digital identities for individuals and enterprises, and steadily expand the coverage of digital services in cross-border collection and payment services. Support financial institutions to use blockchain technology and other methods to optimize the authenticity review of customers' electronic documents and electronic information materials, improve the ability of "precise portraits" and improve the quality of cross-border financial services for "going out" enterprises. Support pilot banks in Shanghai to actively participate in the digital currency bridge project of the multilateral central bank and explore innovative special scenarios. Support the Foreign Exchange Trading Center to provide foreign exchange liquidity management and exchange services to the multilateral central bank’s digital currency bridge.

In terms of optimizing exchange rate hedging services and improving foreign exchange risk management and response capabilities, the "Action Plan" proposes to develop diversified exchange rate hedging products and services.

For example, support the Foreign Exchange Trading Center to provide trading facilities for RMB foreign exchange transactions in the free trade pilot zone, improve the "Belt and Road" and jointly build national currency foreign exchange trading services. Attract more companies to participate in the "Bank-Enterprise Foreign Exchange Trading Service Platform" of the Foreign Exchange Trading Center, encourage more banks to access the platform to directly quote, and facilitate all types of enterprises to carry out foreign exchange business. Banks are encouraged to actively expand the "first-time" enterprises for exchange rate risk aversion, promote enterprises to enhance their awareness of exchange rate risk aversion, and reduce the cost of enterprises' exchange rate risk aversion. Support banks to increase the development of exchange rate hedging products, enrich the RMB-to-exchange ordinary American options, European options, Asian options and their combination products, and continuously increase the types of RMB foreign exchange derivative products in the domestic market.

Expand two-way financing channels at home and abroad

The Action Plan clearly states that financing services should be strengthened and financing will be facilitated by enterprises in global investment and financing. Including gathering cross-border syndicated loan centers and businesses, piloting trade refinancing business through rediscount windows, expanding two-way financing channels at home and abroad, using blockchain technology to standardize the development of supply chain finance, and facilitating cross-border financing of financial leasing companies.

In terms of expanding two-way financing channels at home and abroad, the "Action Plan" proposes to support qualified banks to refer to international practices and explore and study providing non-resident merger and acquisition loan services to "going out" enterprises in the Shanghai Free Trade Pilot Zone. The loan amount shall not be higher than 80% of the merger and acquisition transaction price, and the loan term shall not exceed 10 years. Support banks to meet the financing needs of domestic and foreign member units of multinational companies through "official direct loans", "domestic guarantee and foreign loans", "foreign guarantee and domestic loans" and other forms under the premise of controllable risks. Support enterprise group financial companies to carry out "foreign guarantee and domestic loan" business, collect funds from overseas member units and provide financing support to them, facilitate enterprise group domestic and foreign member units to coordinate domestic and foreign financing, and reduce financing costs. Improve the "Magnolia Bond" development supervision system and further enrich value-added services such as agency interest payment and company behavior processing.

The Action Plan also proposes to improve comprehensive financial services and enhance global allocation capabilities. For example, improve the facilitation of global asset management. Support qualified domestic limited partners (QDLP) pilot enterprises to reasonably improve the efficiency of fund use under the premise of compliance with regulations, and allow subscribing to domestic low-risk funds (R2 and below) short-term cash management products such as cash management, fixed deposits, etc., and subscribe to overseas cash management products based on the open characteristics of overseas main funds. Support QDLP pilot enterprises to complete domestic fundraising and fund establishment, and exchange and exit from the country in batches according to the needs of overseas main funds. Support expanding QDLP fundraising sources and exploring the raising of local and foreign currency funds.

The People's Bank of China and the Shanghai Municipal People's Government stated that in the next step, we will work with relevant departments to promote the implementation of various measures of the "Action Plan", further improve the facilitation of cross-border investment and financing, continuously enhance the competitiveness and influence of Shanghai's International Financial Center, and promote high-quality economic development and high-level opening up to the outside world.