BEIJING, Sept. 27 (Xinhua) -- Chinese banks in the Shanghai Free Trade Zone (FTZ) were allowed on Friday to conduct offshore business, a move further liberalizing financial markets.
Chinese banks in the zone will be permitted to provide services to depositors resident in other countries.
Shanghai FTZ, a testing ground for financial reform, will also allow eligible foreign financial institutions to set up banks, and team up with qualified domestic banks in joint-ventures.
On Friday, some domestic banks, such as Bank of Shanghai, China Construction Bank, the Industrial and Commercial Bank of China and Shanghai Pudong Development Bank announced that they were approved to set up branch banks in the FTZ.
Shanghai Pudong Development Bank sees the FTZ as a great opportunity to provide clients with services based on its offshore and onshore financial platforms. The bank has been researching capital account convertibility and RMB cross-border use, and will issue a comprehensive plan on financial services once FTZ policies are fully in place.
Trade and openness in the FTZ service sector need to be supported by major financial reforms such as full convertibility of the yuan and freer capital flows, said Lian Ping, chief economist at the Bank of Communications.
China Construction Bank will grant large extensions of credit in the FTZ to support infrastructure construction, international commodity trading, service outsourcing, cross-border mergers and acquisitions and other major projects. It will make the FTZ a platform for financial innovation on RMB capital account convertibility, commodity trading platforms and cross-border RMB businesses.
"The joy of the Shanghai FTZ is that it is an open platform where foreign and Chinese companies compete on a level-playing field," said Shen Minggao, chief economist at Citibank.
China aims to lift the zone up to international standards featuring convenient investment and trade, free exchange of currencies, efficient supervision and a sound legal environment after two to three years of tests, according to the detailed plan published on the government's website on Friday.
The plan also establishes a foreign exchange management mechanism adaptable to trade and investment reform in the zone.