China permits RMB convertibility on capital account in FTZs

Bs_logoImage
Press Trust of India Beijing
Last Updated : Dec 11 2015 | 2:57 PM IST
Buoyed by the IMF's move to include the yuan in theSpecial Drawing Rights (SDR) basket, China today approved yuan convertibility on the capital account within USD 10 million in Tianjin, Guangdong and Fujian free trade zones (FTZs).
This is a significant step by China to open up its capital accounts. China allowed renminbi (RMB) convertibility on trade accounts nearly two decades ago, but almost all capital account transactions in China are under varying degrees of control, state-run Xinhua news agency reported.
The move also came less than two weeks after the RMB was admitted by the International Monetary Fund into its Special Drawing Rights basket alongside the dollar, euro, pound sterling and yen on November 30.
China has earlier permitted yuan convertibility in Shanghai Free Trade Zone set up in 2013.
For each domestic institution outside of the negative list, the cap was set separately for both the cross-border revenue and the expenditure on yearly basis, the People's Bank of China said in guidelines issued here.
The guidelines encourage banks in the FTZs to deal with transactions between RMB and foreign exchange derivatives.
Cross-border RMB investment funds are welcomed in Fujian FTZ, while cross-border RMB transactions between non-banking financial institutions and the Hong Kong and Macao regions are permitted in Guangdong FTZ.
The guidelines also support institutional investors in Hong Kong and Macao to launch qualified domestic limited partnerships (QDLP) in Guangdong FTZ, raising RMB capital in the zone to invest in the Hong Kong capital market.
Subscribe to Business Standard digital and get complimentary access to The New York Times

Smart Quarterly

₹900

3 Months

₹300/Month

SAVE 25%

Smart Essential

₹2,700

1 Year

₹225/Month

SAVE 46%

Super Saver

₹3,900

2 Years

₹162/Month

Subscribe

Renews automatically, cancel anytime

Here’s what’s included in our digital subscription plans

Access to Exclusive Premium Stories

  • Over 30 subscriber-only stories daily, handpicked by our editors

Complimentary Access to The New York Times

  • News, Games, Cooking, Audio, Wirecutter & The Athletic

Business Standard Epaper

  • Digital replica of our daily newspaper — with options to read, save, and share

Curated Newsletters

  • Insights on markets, finance, politics, tech, and more delivered to your inbox

Market Analysis & Investment Insights

  • In-depth market analysis & insights with access to The Smart Investor

Archives

  • Repository of articles and publications dating back to 1997

Ad-free Reading

  • Uninterrupted reading experience with no advertisements

Seamless Access Across All Devices

  • Access Business Standard across devices — mobile, tablet, or PC, via web or app

More From This Section

First Published: Dec 11 2015 | 2:57 PM IST