2014-15 Canada-China Business Forum Magazine | Page 26

TRADE certainly prepare the 2014 and 2015 lists, which are expected to be much shorter than the 2013 list. As promised, the 2014 list was published in June 2014. Restrictions were reduced by 27 per cent. However, it is still deemed as an “unqualified” negative list. COMMERCE institutions in the Zone may borrow offshore Renminbi to as much as 100 per cent of the firm’s registered capital or 150 per cent for non-financial institutions. Select multinationals can enjoy a so-called two-way cross-border Renminbi cashpooling financial service which can help them conveniently deal with their balance sheets with multiple currencies. In February 2014, Renminbi settlement for cross-border e-commerce was relaxed to designated firms. More facilitation measures are implemented to help the cross-border Renminbi settlement for current account and direct investment. The U.S. Secretary of Commerce stated that the 2014 list couldn’t serve as the basis for China-U.S. BIT negotiations. Two major concerns have been raised against the 2014 list. The first concern is that there are still too many restrictions on the key service sectors, such as financial and other sectors. Second concern, is that restrictions are still so general that the Central government may intervene at any time with foreign investments, and resulting in a broader negative list than it may appear to be. Nevertheless, one can see real progress made by the Central government, and the negative list is becoming shorter, more transparent and applicable to foreign investors. Among these liberalization policies, the most important one is the Free Trade Account Unit (FTU). Since May 2014, eligible institutions and individuals can transfer and convert funds conveniently to accounts overseas, to other FTUs and to foreign entities in China. Via FTUs, the Shanghai FTZ is going to be the financial entrepôt for both Chinese and international capital, although current liberalization efforts are mainly limited to current accounts and foreign direct investment. Despite criticisms, financial liberalization is receiving more positive reviews. Twenty-three foreign firms had established themselves in the Zone within a month after the release of the 2013 negative list. The number of firms grew slowly to 38 firms two months later. However, after the proposal on financial liberalization made by the People’s Bank of China (PBOC) in December 2013, the number of firms jumped to 95 in less than a month. The number then exploded to 800 before the 2014 negative list was even released. Each firm had an average investment of over USD 6 million. While it is still not clear how and to what extent the Shanghai FTZ can achieve its ambitious goals, it is clear that the Central government has made up its mind to push forward the “deepwater reforms” in order to face internal and external challenges. As emphasized repeatedly, that if successful, the experiments in the Shanghai FTZ will be replicated in the rest of China. To those who are interested in the future of China, the Shanghai FTZ is certainly the place worth paying attention to and exploring. \\ BC The PBOC financial reforms are in four key areas: to internationalize the Renminbi for international transactions; to gradually liberalize capital accounts; to accomplish interest rate marketization; and to facilitate Renminbi convertibility. In a word, PBOC’s ambition is to promote the Renminbi internationalization. The principle of the financial reforms is quite clear: financial liberalization should be based on the real economy, facilitate trade and investment, and have sound risk control mechanisms. That disappoints some observers. Many do not want to see as many financial innovations and products such as those found in the U.S. Detailed laws and regulations according to the proposal have been gradually released since February 2014. Bo Chen is deputy chair of the Department of International Economics and executive director of the Research Centre on Free Trade Zone at the Shanghai University of Finance and Economics. Bo is also a research associate at the Asia Pacific Foundation of Canada, Federal Reserve Bank of Dallas and the Pacific Economic Cooperation Council. He is a consultant on various ongoing government reform projects, especially on the policies on trade and investment facilitation. For instance, since February 21, 2014, the Shanghai FTZ became the first place in Mainland China to permit the inflow of Renminbi from abroad. Financial 25 La zone de libre-échange de Shanghai : retour sur les triomphes, les leçons apprises et la voie à suivre L a décision de mettre sur pied une zone de libre-échange (ZLE) pilote à Shanghai, découle de nombreux problèmes internes et externes auxquels la Chine fait aujourd’hui face. Il est largement admis que les problèmes de ralentissement économique de la Chine sont des symptômes du piège du revenu moyen (middle-income trap). Éviter ce piège nécessiterait de pénibles changements structurels. Des ententes internationales de haute qualité portant sur le libre-échange et l’investissement, comme les Partenariats Trans-Pacificique, l’Accord sur le commerce des services (ACS) ainsi qu’une variété de négociations de Traités d’investissement bilatéraux (TBI) ont poussé la Chine à se libéraliser face au reste du monde. Pourtant, ni les changements structurels ni la libéralisation des marchés ne sont des concepts nouveaux pour les Chinois. Les « réformes en eaux profondes » concernant la libéralisation des marchés prennent beaucoup de temps à la Chine, car le gouvernement est très soucieux des risques associés à ces réformes. Considérant cela, le gouvernement chinois a décidé de choisir Shanghai, dont l’industrie des services financiers et commerciaux est mature, comme un