New measures encourage the cross-border inflow of renminbi

On 20 February 2014, the Shanghai head office of the People’s Bank of China (PBOC) issued the Notice on Supporting Expansion of Cross-Border Use of the Renminbi in the China (Shanghai) Pilot Free Trade Zone. Item 4 of the notice sets out detailed rules for the offshore borrowing of renminbi by financial institutions and enterprises in the China (Shanghai) Pilot Free Trade Zone. This provision permits enterprises in the zone to borrow and use, under certain conditions, offshore renminbi borrowings, signifying that the cross-border use of renminbi by enterprises in the zone has taken another step forward. It is also being deemed a new measure of China’s acceptance of the cross-border inflow of renminbi.

Existing policies

Before the issuance of the notice, China’s existing policies on the cross-border inflow of renminbi mainly included:

1. the Notice on Matters Relevant to the Pilot Project for the Use by Offshore Renminbi Settlement Banks and Two Other Types of Institutions of Renminbi to Invest on the Interbank Bond Market (2010), published by the PBOC on 16 August 2010;
2. the Administrative Measures for Direct Investment by Foreign Investors in Renminbi Settlement Business (2011), published by the PBOC on 13 October 2011;
3. the Measures for the Pilot Project for Domestic Securities Investment by Fund Management Company and Securities Company Renminbi Qualified Foreign Institutional Investors, order No. 76 of the China Securities Regulatory Commission (CSRC), PBOC and State Administration of Foreign Exchange (SAFE), jointly issued by the CSRC, the PBOC and SAFE on 16 December 2011;
4. the Provisional Administrative Measures for Cross-Border Renminbi Loans in Qianhai (2012), approved and published by the PBOC on 27 December 2012.

David Yu is a partner and Kevin Huang is an associate at Llinks Law Offices