China’s Central Bank Unveils Financial Opening-Up Plan

China is expected to implement a slew of new measures in coming months in a bid to reform its financial sector, signaling a new era of opening-up.

People’s Bank of China (PBOC) Governor Yi Gang pledged to support the transformation of Shanghai into a global financial hub, adding that to achieve this status, the city should strive to become an international center for the allocation and risk management of renminbi-denominated financial assets.

Speaking at the 11^th Lujiazui Forum in Shanghai on Thursday June 13, Yi presented a detailed roadmap for financial liberalization. Specifically, he announced his support of a new Shanghai-based pilot scheme that will scrap limits on foreign ownership in local securities and fund management ventures.

Take a look at some of our previous articles: China approves a new Foreign Payment option

The move comes as trade tensions with the United States are starting to take a toll on the economy. It is also consistent with announcements by the China Banking and Insurance Regulatory Commission earlier this year to relax market access to the financial sector. These included abolishing the upper shareholding limits in Chinese commercial banks, allowing foreign banks to conduct RMB transactions without prior approval and removing asset requirements for overseas banks that seek to set up branches.

Overview of the New Financial Opening- Up Measures

One of the first highlights of Yi Gang’s speech refers to the establishment of an integrated domestic and foreign currency account system in the Shanghai Pilot Free Trade Zone, along with the implementation of a streamlined cross-border capital management process.

Similarly, financial authorities will continue to improve the inter-bank foreign exchange and bond markets, introducing more types of foreign exchange options and opening the market to new participants.

In addition, a cross-regional financial cooperation platform will be set up in the Yangtze River Delta region. The platform’s goal is to strengthen the interconnection of financial infrastructure in Shanghai and its neighboring provinces.

The blueprint also identifies key strategic orientations for Shanghai to become a major financial center at a global scale. These include:

• Turning Shanghai into a RMB asset allocation center
• Establishing Shanghai as a risk management center for RMB financial assets
• Transforming Shanghai into a financial technology center

“The People’s Bank of China actively supports Shanghai to explore relevant methods for the application of new technologies such as artificial intelligence, big data, cloud computing, blockchain, and e-commerce in the financial field to promote a deeper integration of finance and technology.” Yi said during the conference.

Finally, he underlined the importance of raising Shanghai’s attractiveness for top talents in the finance sector.

Conclusion

Chinese financial institutions held 302.71 trillion yuan (about 43.8 trillion USD) in total assets by the end of the first quarter in 2019. That represents an 8% year-on-year increase in volume according to the PBOC. China’s long-anticipated lowering of foreign investment barriers will undoubtedly see more overseas financial institutions securing a slice of this booming market.

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