Financial Services Focus Group Quarterly Update - Q3 2014

Published on 2014-10-16

Q3 saw the issuance of a raft of regulations related to finance and the financial services industries that impact foreign businesses in China.

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Q3 saw the issuance of a raft of regulations related to finance and the financial services industries that impact foreign businesses in China. One of the highlights is the Notice on Issues Relating to Pilot Scheme of Reform of Administration of Foreign Currency Capital Settlement by Foreign Investment Enterprises in Certain Regions (Circular 36), issued by the State Administration of Foreign Exchange and effective August 4, 2014. Circular 36 liberalises foreign exchange regulations governing conversion and use of foreign currency registered capital by foreign-invested enterprises (FIEs) in 16 designated pilot areas located in special zones. Under Circular 36, FIEs in the 16 pilot areas can choose to freely convert and withdraw 100% of their paid-in foreign currency capital based on actual business needs. FIEs whose principal activity is investment can convert their registered capital in accordance with the actual investment scale. Capital of FIEs that has been converted into RMB can be transferred to the bank accounts of investee companies, provided that the investment is a bona fide investment and complies with the law. This liberalisation provides important financing flexibility for FIEs located in the pilot zones.

The Implementation Measures on Administrative Licensing Items for Foreign Funded Banks (“CBRC Measures”) was promulgated by the China Banking Regulatory Commission on September 11, 2014 and reduce administrative licensing items for foreign-funded banks, simplify procedures for administrative licensing, and unify market access standards for both Chinese-funded and foreign-funded banks. The CBRC Measures also remove restrictions on foreign-funded banks regarding establishment of sub-branches (previously only one sub-branch per city was permitted) and remove minimum operating capital requirements for sub-branches. These welcome measures are important for the expansion of foreign bank business in China.

On the economic side the PBOC is sticking to prudent monetary policy for now. The monetary policy committee is pushing for a market-oriented interest rate reform and the RMB exchange rate formation reform to keep the exchange rate of the currency fundamentally stable at a reasonable and equilibrium level.

Use of the RMB is continuing to gain ground globally and RMB activities are accelerating across European financial centres notably London that has established itself as the major RMB trading hub outside Asia. This also signals a big step forward in the continuing internationalisation of the currency. Payments worldwide using the RMB nearly tripled in value in the two years to August 2014.

The FSFG held its quarterly committee meeting on 11th September at the offices of Standard Chartered hosted by CFO Patrick Sullivan who has now relocated to the number 1 global financial centre. Again we would like to thank Patrick for all his support for the Chamber (and in particular the FSFG) over the years.

The FSFG has continued to provide a range of events for our membership. Following our summer event on inheritance tax that provided an overview of the UK IHT regime to cover domicile (who needs to pay IHT), thresholds (at what wealth level does IHT become payable) and allowances that was held at the Chamber offices, the third quarter began with an Economic Outlook provided by Peter Zhu –a senior Economist at HSBC. This event was well attended with more than 50 people turning up. Then in September we held a fascinating event to discuss the issues of Kidnap & Ransom with speakers from Control Risks and Willis Insurance Group. And finally our Bitcoin event is also ready for later this year where we will examine the significance of the cryptocurrency that we have all heard about and learn from a panel of experts how it is relevant to us and how it might shape the financial world of the future.

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