China’s free trade zones to expedite capital account liberalisation: ANZ

BEIJING – ANZ Bank sees China’s State Council decision to launch three more Free Trade Zones - in Tianjin, Fujian and Guangdong – and to expand the scale of Shanghai’s FTZ as a highly strategic initiative with the new FTZs framed from a global perspective. The ‘Belt and Road’ initiative mentioned in the announcement suggests the original Shanghai-driven initiative in 2013 has now escalated to the national level, ANZ says.

“The plans are carefully crafted with an aim to promote cross-border and international cooperation, transform the industrial structure of the coastal regions, and allow foreign participants and the market to play a greater role in the economy.
“With respect to capital account convertibility, the press conference (April 20) reiterates that the ultimate goal is to position Shanghai as an international financial centre. Since Shanghai is China’s financial centre and there is little room for local FTZs to deviate from the national regulatory framework that governs banking, securities and insurance, Shanghai’s FTZ will continue to lead financial liberalisation and define the maximum level of capital account openness,” ANZ says.
“However, the new FTZs will help expand the scale of RMB internationalisation and cross-border transactions. The increasing cross-border flows will promote the convergence of onshore and the offshore RMB markets.
“Unlike other reforms which cover physical goods and people flows, capital account liberalisation requires careful control. We reiterate our view that policy sequencing is required for capital account liberalisation in order to contain and mitigate financial risks. To achieve this, policymakers need to quicken domestic financial sector reform to support the FTZ initiative.” www.live.anz.com (ATI).