Shanghai expects to trial yuan convertibility in free trade zone - paper
SHANGHAI, June 6
SHANGHAI, June 6 (Reuters) - China's financial centre Shanghai expects to gain approval soon to open a free trade zone that will test yuan convertibility and cross-border capital flows, the official Shanghai Securities News reported on Thursday.
China's new leaders have signalled they want to quicken the process of making the yuan fully convertible over the next few years, as part of efforts to boost the currency's use in trade and support wider financial reforms.
Shanghai officials have been steadily lobbying China's State Council -- the country's cabinet -- for permission to open their own zone to experiment with capital account liberalisation and yuan convertability, concerned that the city could be left behind as rival financial centres, such as Hong Kong and Taiwan, move to develop cross-border yuan financial services.
Shanghai's lobbying efforts intensified following the creation of a special trade zone in 2012 in Qianhai, near the southern boomtown of Shenzhen and across from Hong Kong, that is also being used to trial yuan convertibility.
The Qianhai zone, which is administered by the People's Bank of China, now allows banks from Hong Kong to offer cross-border yuan-denominated loans to mainland companies in the zone.
Other initiatives announced in 2013 include trial programmes that make it easier for foreign firms to move funds in and out of China, reducing approval requirements and simplifying bank account procedures.
However, some bankers and corporate treasurers said the proliferation of different pilot programmes administered by different institutions including the PBOC, the State Administration of Foreign Exchange (SAFE) and now the Shanghai municipal government, risks confusion and bureaucratic turf wars.
The opening of the zone is also expected to help China's case if it decides to enter into negotiations to join the U.S.-led Trans Pacific Partnership (TPP) trade agreement, the report said.
The zone is expected to be approved as early as July, and will be located near China's existing Waigaoqiao free trade zone in the Pudong district, the report said. It did not provide details on what kinds of specific programmes related to yuan internationalisation were being contemplated.
(Reporting by Pete Sweeney; Editing by Jacqueline Wong)