Central bank regulations give boost to Fujian pilot free trade zone - ignition electrodees

China's central bank has issued detailed regulations on expanding cross-border use of the yuan in the China (Fujian) Pilot Free Trade Zone. It will bring more business opportunities to commercial lenders in Fujian province, bankers said.

Qi Yun, deputy general-manager of Bank of China Ltd's Xiamen branch, said: "We've been waiting for detailedes regulations on cross-border use of the yuan for a long time.

Lian Gengsheng, director of the administration of the Xiamen Area of the Fujian free trade zone, said under the new rules, individuals who work or live in the FTZ will be allowed to make overseas direct investments.

A banker who declined to be named said it means that from now on, individuals can make direct investments in overseas companies although the central bank is unlikely to allow them to invest directly in stocks and real estate in another country. - ignition electrode

The upper limit on overseas direct investments by individuals still remains unknown, according to a notice issued last week to banking institutions by the Xiamen central subbranch of the PBOC, the central bank.

Before the new move, cross-border yuan settlement for these individuals was restricted to trade in tangible productses and in services.

The PBOC will also widen the scope of two-way cross-border yuan cash pooling for multinational corporations by lowering the entry threshold. As a modern instrument of cash management, cash pooling enables companies to centralize liquidity management and optimize interest income.

Multinationals are allowed to choose a member of the group that is registered in the Fujian FTZ as the leading company to set up a two-way cross-border yuan cash pool. Members of the group participating in cash pooling must have been operating for more than a year. - Thermocouple

Previously, a Chinese member of the multinational group that is allowed to join the cash pool was required to pThermocoupleost an operating revenue of no less than 1 billion yuan ($154 million) in the previous year, while the minimum requirement for an overseas member was 200 million yuan.

But now, bothes figures are cut in half.

Furthermore, the ceiling for cross-border yuan capital net outflows or net inflows is raised from half to the equivalent of the owner's equities of the group's members participating in the cash pool.

The notice also listed several other detailed regulations, including a rule that will allow financial institutions and companies in the Fujian FTZ to use the funds flowing back to China after the money is raised through the issuance of offshore yuan bonds.

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