Premier Li Keqiang said free trade account reforms, now being tested in the Shanghai Pilot Free Trade Zone to allow businesses to conduct easier cross-border transactions, could be introduced to other areas.
He made the remarks on Nov 25 during a fact-finding trip to Shanghai, in a move to push for bolder financial reforms in a risk-controlled environment.
Premier Li said the FT account system, already under operation in the zone for more than a year, is an important measure to leverage both offshore and onshore markets. “The trial could be introduced to other places where conditions fit,” he said.
China’s central bank officially launched the free trade account system for the Shanghai FTZ in June 2014 to allow companies registered in the FTZ to use the account for financing, investment and other cross border transactions.
Firms in the zone can borrow offshore funds, deploy capital between subsidiaries both in and out of China and enjoy greater flexibility in managing foreign exchange.
By now the Shanghai FTZ has seen more than 39,000 FT accounts being opened, and cross-border transactions have reached 3.8 trillion yuan ($594.7 billion).
From January to September, the number of newly registered foreign-invested enterprises in the Shanghai FTZ rose 52.6 percent year-on-year while such entities have more than tripled in the Guangdong, Tianjin and Fujian FTZs, according to the Ministry of Commerce.
“Economic statistics shown that the FTZs are the trailblazer of China’s reforms,” the Premier said.
“It has demonstrated that the multiple effects when the role of the market is being respected”.
During his visit to the Shanghai Head Office of the People’s Bank of China, Premier Li listened to reports on the ongoing reforms in the banking, securities and insurance sectors.
“Now that the systematic risks have been prevented, we have to work in favor of stronger financial reforms.
“We have to work toward a two-way opening of the capital market,” Premier Li was quoted by an official statement as saying.
He also urged the municipal leadership to set up a market for insurance transaction to diversify risks.
In a move in October deemed a major step forward in loosening the government’s control on capital accounts, the central government allowed individuals in the zone to directly buy overseas assets, including businesses, stocks and real estate, instead of going through a third party, such as banks and securities firms.
It was Premier Li’s third visit to the Shanghai FTZ since the reform pilot was being discussed as a water-testing area for bolder reforms. In December 2014, more than one year after the establishment of the Shanghai FTZ, the central government approved three other pilot areas in Tianjin, Fujian and Guangdong.