China expands cross-border cash pooling trial for multinationals
What’s new: China is expanding a trial program that facilitates the cross-border use of funds from multinational companies, another step in the country’s longstanding effort to internationalize the yuan.
As part of the pilot project, launched for the first time in Beijing and Shenzhen in March 2021Selected companies can combine their cross-border yuan and multi-currency cash pools into a single pool and purchase foreign currencies for overseas payments at will within certain limits.
Six additional provincial-level cities and regions – Shanghai, Guangdong, Shaanxi, Zhejiang, Qingdao and Ningbo – and other multinational enterprises have been included, according to a joint statement issued Friday by the People’s Bank of China (PBOC) and the Administration. of State of Foreign Currencies (SAFE).
Under the expanded program, participating multinationals were allowed to manage the centralized collection and payment of funds from their overseas entities at the national level, according to the statement.
The background: Prior to the pilot program, many multinationals’ multi-currency and yuan cash pools were managed separately by the PBOC and SAFE, and were subject to two sets of rules, hampering the cross-border use of funds.
The program has made it easier for multinational companies to use local and foreign currencies and has effectively reduced foreign exchange risks and financial costs for companies, according to the PBOC and SAFE.
Since its launch, nearly $50 billion in cross-border funds have been involved in the program, the two agencies said.
Related: Five things to know about China’s loosening grip on cross-border fund flows
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