China enhances financial support for foreign trade, overseas financing to boost open dev.

By： Belt and Road Portal Update：2022-03-31

China is strengthening financial efforts to support the entire foreign trade industry chain and overseas financing, with the aim to stabilize foreign trade and secure the smooth listing of Chinese companies overseas.

-- Introducing multiple financial support policies

Facilitation of foreign exchange receipts and payments is an important part of financial services for foreign trade.

In January 2019, the State Administration of Foreign Exchange (SAFE) started the first pilot projects to facilitate foreign exchange receipts and payments in goods trade in the Guangdong-Hong Kong-Macao Greater Bay Area, Shanghai and Zhejiang, granting banks with prudent compliance and enterprises with good credit more autonomy in documents review and special foreign exchange refund business registration.

Over the past three years and more, new measures have been taken to improve the pilot programs and facilitate trade business, including further optimizing foreign exchange management methods, simplifying related procedures and broadening channels for capital use.

Since the launch of the trial, a total of 26 regions nationwide have implemented the policies to facilitate foreign exchange receipts and payments for trade business of high-quality enterprises, involving 770,000 transactions worth 506.1 billion U.S. dollars, noted Liu Bin, head of the Current Account Management Department with SAFE.

According to Liu, in 2021, the receipts and payments of business involved increased by 1.5 times and 1.8 times respectively year on year, and foreign exchange receipts and payments for trade business of high-quality enterprises can be handled in minutes, with more than half of the time for documents preparing and business handling saved.

In this context, high-quality banks are also paying more attention to the evaluation of the credit status, compliance level and risk control ability of customers, shifting focus from the examination of transaction documents to the essence of enterprise transactions, and further improving the level of personalized services, said Liu.

In the next step, Liu noted, SAFE will steadily expand the main body and business scope of the facilitation of foreign exchange receipts and payments in trade for high-quality enterprises, promote the implementation of related policies to realize regional coverage, and inspire banks to implement the facilitation policies, ensuring more enterprises to enjoy policy convenience.

In this year's government work report, it puts forward "to make export credit insurance cover more micro-, small-and medium-sized foreign trade enterprises".

Export credit insurance mainly covers the commercial and political risks of export business, which can reduce or eliminate the worries of exporters, and as an important means of policy support for export, it has a strong pulling effect on export, said Pan Helin, co-director and a researcher with the Research Center for Digital Economics and Financial Innovation of the International Business School, Zhejiang University.

Especially in the context of profound global changes unseen in a century, there are more and more uncontrollable factors such as exchange rate fluctuations, trade embargoes and export controls, so taking out export credit insurance has become an important means for exporters to disperse risks, noted Pan.

-- Serving new forms of foreign trade

In recent years, new forms of business in foreign trade have been mushrooming, including cross-border e-commerce, market procurement trade, etc. The market entities for these businesses are mainly micro-, small-and medium-sized enterprises and individual businesses which have greater demands for efficient and convenient financial services.

Focusing on the transaction characteristics of "small amount, mass volume, electronization" of the new forms of business in foreign trade, SAFE has rolled out a series of foreign exchange management policies to optimize and promote the development of these businesses.

For instance, to broaden the settlement channels for these businesses, SAFE support eligible banks and payment institutions to handle foreign exchange settlement and sale and receipt and payment of related funds for cross-border e-commerce and other new forms of business in trade with electronic transaction information such as online electronic orders and logistics, providing market players with more efficient and convenient cross-border settlement services with lower costs.

Under the guidance of relevant policies, financial institutions have also made positive progress in serving the settlement of foreign exchange funds. In 2021, 21 payment institutions and 12 banks had handled 1.93 billion foreign change transactions of cross-border e-commerce.

China CITIC Bank, for example, reduced the cross-border e-commerce settlement commission to two thousandths, and effectively shortened the settlement period to basically realize the real-time payment of overseas funds.

Easing the difficulty and high cost of financing in cross-border finance for small- and medium-sized foreign trade firms has always been a focus of SAFE.

In 2019, SAFE took the lead in building a cross-border financial service platform to help these firms with financing, with an information sharing and end-to-end verification mechanism among government departments, banking departments, insurance companies and enterprises gradually established, according to Zhang Tiecheng, head of the Science and Technology Department with SAFE.

"We have successively launched five financing application scenarios and two foreign exchange policy facilitation application scenarios to direct financing funds to small- and medium-sized firms (SMEs), greatly improving their financing efficiency and success rate," Zhang said.

Data showed that by the end of February 2022, there were 300 corporate banks voluntarily participating in the use of financing scenarios of the cross-border financial service platform, and more than 12,000 enterprises were served, with 70 percent of them SMEs.

"This year, SAFE will continue to intensify efforts to enrich and expand the application scenarios of the platform, and further facilitate cross-border trade investment and financing for SMEs," said Zhang.

-- Opening up cross-border trade and investment at a higher level

To promote the steady development of foreign trade and foreign investment, higher-level opening-up needs to be furthered.

In January this year, SAFE carried out high-level opening-up trials for cross-border trade and investment in the Lingang Area of the China (Shanghai) Pilot Free Trade Zone, the Nansha Area of the China (Guangdong) Pilot Free Trade Zone, the Yangpu Economic Development Zone of the Hainan Free Trade Port, and the Beilun District of Ningbo City in Zhejiang Province.

At present, the pilot business has been officially implemented in the above-mentioned four places, and by the end of February, a total of 19 pilot banks were on record, with 275 high-quality enterprises identified, and 4,108 cases of pilot businesses worth 1.45 billion U.S. dollars handled.

The pilot policies mainly involve capital account reform, current account facilitation, and strengthening the building of risk prevention, control and supervision capabilities.

"In terms of capital account reform, we will mainly expand channels for cross-border investment and financing for enterprises and improve the facilitation of cross-border investment and financing," said Zha Xiaoyang, deputy head of the Capital Account Management Department with SAFE.

According to Zha, the current account facilitation includes four specific measures, namely facilitating the receipts and payments of current account funds by high-quality enterprises, supporting banks in optimizing new types of international trade settlement, orderly expanding the scope of enterprises for net settlement of trade balances, and exempting special foreign exchange refunds for trade in goods from registration.

A "more open and safer" foreign exchange management reform path has become one of the explorations of this pilot.

One of the goals of the pilot policies is to strengthen macro-prudential management of cross-border capital flows, improve risk monitoring and assessment and supervision during and after the event, and explore a risk prevention and control mechanism that adapts to the high-level opening-up of investment and financing.

Next, SAFE will guide the pilot areas well implement related policies and measures, promptly assess the effects of pilot policies, and further deepening the reform and opening-up in the foreign exchange area, so as to facilitate cross-border trade and investment, improve business environment, and serve the high-quality development of the real economy.

-- Smoothing overseas financing channels

China Securities Regulatory Commission (CSRC) disclosed in a video exchange event held on March 27 that it has conducted efficient, candid and professional consultations with U.S. regulators on Sino-U.S. audit regulatory cooperation, saying that both sides have shown a positive willingness and pragmatic attitude.

CSRC has previously stated that it will continue to strengthen communication with U.S. regulators and strive to reach an agreement on Sino-U.S. audit supervision cooperation as soon as possible. It will also promptly implement the new regulations governing the overseas listing of enterprises.

At present, the channels for enterprises to go public overseas remain unimpeded. CSRC, through communication and coordination with relevant industry authorities, has recently issued no objection reply to ZKH Industrial Supply Co., Ltd. and other companies planning to go public in the United States.

Actually, in order to support companies to list overseas in accordance with related laws and regulations, relevant authorities have been pushing for related efforts. In December 2021, CSRC published drafts on administrative regulations of the State Council on domestic enterprises' overseas securities issuance and listing and on administrative measures for the record of domestic enterprises' overseas securities issuance and listing, and solicited public opinions.

Industry insiders believe that improving the supervision system of overseas listing is the need to support the development of enterprises using overseas capital market in accordance with related laws, which will greatly improve the overall compliance level of Chinese enterprises' overseas listing. It is also the need to deepen the reform of "streamlining administration and delegating power, improving regulation and upgrading services" of overseas listing supervision, and to promote high-level institution-based opening-up.