For those who usually pay attention to import and export business and cross-border capital transactions, be sure not to miss a piece of major news recently, which is directly related to the cost and convenience of currency exchange and hedging.
At the Lujiazui Forum on the 17th of this month, the person in charge of the central bank announced a new foreign exchange support plan.
The purpose of the plan is to break down the barriers between domestic and foreign foreign exchange markets, expand open channels in both directions, and build Shanghai into a core city for global investors to allocate RMB assets and hedge financial risks.
The policy designated six banks to participate in the pilot work, including ICBC, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications and China CITIC Bank. They are allowed to conduct offshore RMB foreign exchange-related transactions in the Shanghai Free Trade Zone.
Today, five major state-owned banks have completed their first round of practical transactions.
Each bank has used its own advantages to rush into the market, and its business coverage has its own characteristics.
ICBC acted the fastest and submitted bilateral market-making quotations early. The overseas financial institutions it cooperates with are located in the United Kingdom, Singapore and other places, and all spot, forward and swap businesses are open.
The choice of convertible currencies is wide. In addition to the well-known US dollars, euros, and Japanese yen, niche currencies such as Australian dollars, Thai baht, South African rand, and Turkish lira are also included.
The Agricultural Bank of China quickly mobilized all resources at home and abroad to open up transaction channels for the head office, local peers and overseas branches, and landed multiple cross-border orders on the same day the pilot was launched, successfully implementing the reform tasks.
Bank of China considers the currencies of developed economies and countries along the Belt and Road, and successfully concluded offshore transactions with overseas counterparts on the first day, covering spot and swap types.
China Construction Bank has outstanding service efficiency. As soon as the policy was announced to the outside world, the first batch of pilot foreign exchange transactions were implemented on the same day.
Bank of Communications connected with multiple overseas institutions to complete delivery on the first day, and was able to trade offshore RMB against a variety of foreign currencies such as British Pound Sterling, Swiss Franc, New Zealand Dollar, etc.
Those who have been doing cross-border business all year round will easily notice that the acceptance of RMB overseas is getting higher and higher year by year, and the proportion of RMB used for settlement of various cross-border payments continues to increase. This is also the basis for the smooth implementation of this pilot.
Taking advantage of this pilot window in the Shanghai Free Trade Zone, various banks will continue to expand the volume of offshore RMB foreign exchange transactions and launch more financial products related to exchange rate hedging.
Domestic and foreign financial institutions will cooperate more frequently, and the cross-border circulation of RMB will become smoother.
For large and small foreign trade merchants and multinational operating groups, this is undoubtedly a real benefit.
In the future, the process of managing overseas liquidity and resisting losses caused by exchange rate fluctuations will be greatly simplified and work efficiency will be greatly improved.
A pilot free trade zone is actually a solid step forward for the RMB to enter the global market. In the future, the weight of the RMB in the international financial stage will only steadily increase.
