SHANGHAI, March 3 China's foreign currency
regulator eased restrictions for companies registered in
Shanghai's recently established free trade zone (FTZ),
increasing the amount of foreign currency companies registered
in the zone can lend in offshore markets, according to an
announcement posted on the FTZ's website.
The new regulations issued by the State Administration of
Foreign Exchange (SAFE) increase the amount of funds companies
can lend to 50 percent of net ownership equity, up from 30
The rules also allow domestic banks registered in the zone
to use up to 10 percent of foreign exchange held in a zone
account for investment in China.
China has been moving to make it easier for multinationals
and domestic companies in China to manage their foreign
exchange, in particular by making it easier to borrow and lend
SAFE released a consultation paper detailing plans to make
it easier for domestic companies to guarantee debt incurred
overseas in mid February, shortly after it liberalised policies
allowing intra-company loans across borders, which effectively
allows firms to move currency to where it is most needed.
It is unclear to what extent the new policies will
specifically resuscitate interest in the Shanghai FTZ,
originally touted as the most significant reform pilot in
decades but now widely considered a disappointment given the
cautious scope and scale of the reforms.
There are already multiple pilot projects testing ways to
liberalise China's capital account, not all limited to the zone,
and at the same time many other Chinese cities are applying to
launch their own FTZs.
So far corporates have remained cautious about setting up
shop in the zone, citing uncertainty over when the government
will get around to implementing the promised aggressive reforms
to currency and interest rates.
At the same time, speculators gambling on a new influx of
corporate tenants have already driven up the price of industrial
property in the zone.
Beijing appears to have taken notice of the issue,
establishing a joint committee to improve bureaucratic
coordination between the various financial regulators with
occasionally overlapping jurisdictions in the zone.
(Reporting by Pete Sweeney; Editing by Kim Coghill)