Guidance of the People’s Bank of China’s (PBC) for Implementing the Recommendation by the General Office of the State Council on Supporting Steady Growth of Foreign Trade
To: China Development Bank, other policy-related banks, state-owned commercial banks, joint-equity commercial banks, Postal Savings Banks of China, PBC Shanghai Headquarters, PBC branches, business management departments, central branches at capital cities, central branches at sub-provincial level cities, foreign exchange transaction centers (inter-bank funding centers) and associations of commerce or transaction.
For better implementing the Recommendation by the General Office of the State Council on Supporting Stable Growth of Foreign Trade (2014 No. 19), the PBC has given the following guidance:
1. Further expanding financing channels for enterprises. Banking financial institutions are encouraged to innovate their financial products and services. Export credit insurance financing will be expanded. Flexible tools such as liquidity loans, import & export credit, factoring loans, discounting bill of exchange, documentary credit and external guarantee will be provided for profitable import & export enterprises with order placements and foreign trade service companies, in order to boost the development of small and micro companies. Qualified companies are supported to issue debt financing instruments of non-financial enterprises. Innovative practices should be promoted, such as small and medium-sized enterprise collective notes, regional optimal notes for small and medium-sized enterprises and credit improvement, so as to expand financing channels for export companies including small and micro ones.
2. Enabling policy-related finance to better support foreign trade. Export-Import Bank of China will be encouraged to increase preferential credit for foreign buyers and preferential loans, simplify related project and funding approve process, and support enterprises, especially small and medium-sized ones, to go global with more import-export credit. Policy-related financial institutions will give more support to trade in service, and key projects in service trading will be given priority.
3. Advancing finance lease. More efforts should be paid to develop finance lease with tangible assets as the subject matter and to support the import and export of large equipment. Qualified non-banking financial institutions such as finance lease companies will be given more support to expand financing channels by issuing financial bonds, participating in pilot projects of securitization of credit assets or other methods.
4. Simplifying processes of cross-border trade and the RMB settlement of overseas investment. Banking financial institutors can, based on the principles of “understanding your customers”, “understanding your business” and “due diligence review”, directly provide RMB cross-border settlement for regular and direct investment with payment instructions from domestic companies.
5. Providing service to collectively managed cross-border RMB capital. According to People’s Bank of China, international enterprises can have their cross-border RMB capital managed collectively, such as cross-border two-way RMB capital pool and centralized collection and payment for regular items. Headquarters of international enterprises can appoint member companies (including finance companies) that are running business or investing in China and have registered in China with independent legal personality to be their national or regional representatives for collectively managing their cross-border RMB capital. Regular cross-border RMB collection and payment can be settled through net amount, in the form of total amount by the group or the amount by individual member company. This business should be declared according to relevant rules of international receipts and payments.
6. Providing RMB settlement service for individual cross-border trade. Banking institutions can provide RMB settlement service for trade in goods and service carried out by individuals. Based on the principles of “understanding your customers”, “understanding your business” and “due diligence review”, banks can provide this service if the customer presents valid identity document or business license. If necessary, customers may be required to show relevant business documents.
7. Supporting cooperation between banking institutions and payment institutions on cross-border RMB settlement business. Banking institutions can cooperate with payment institutions that have internet payment permit to provide RMB settlement service for cross-border trade in goods and service by enterprises and individuals. An agreement on cross-border e-business RMB settlement should be signed, and such cooperation should be reported to local branch of the People’s Bank of China for documentation.
8. Building the credit and information system for foreign trade enterprises. According to the Outline for Building the Social Credibility System (2014-2020), relevant departments and industries shall improve the management of credit records of social members gained from administration and enforcement, better disclose information on government affairs, improve information sharing among departments and use credit service products more regularly, thus building a social credit system which also covers foreign trade enterprises. Credit information of social members including foreign trade companies will be further collected and applied to build a credit database, thus providing better financial service for foreign trade enterprises.
9. Improving RMB exchange rate mechanism. Market-oriented RMB exchange rate mechanism will be further improved, in which market will play a bigger role in deciding exchange rate, thus realizing the balance of international payment. According to the development of foreign exchange market and economic and financial situation, RMB exchange rate two-way floating flexibility will be strengthened for maintaining the stability of RMB exchange rate within a proper range. Market will play a more decisive role in exchange rate, and the floating system with proper management based on market supply and demand will be improved. The over-the-counter market between RMB and other currency will further grow.
10. Providing more hedge tools. More efforts should be paid to innovating foreign exchange product, providing more products, and developing foreign exchange option portfolio and futures, in order to provide a wide range of products including sight, forwards, futures and option, and products integrating exchange rate and interest rate. The number of players at the foreign exchange market will be increased, better access will be provided for foreign exchange derivatives of commercial banks and requirements will be eased for small and medium-sized banks to provide future foreign exchange settlement service. Infrastructures for dealing, clearing and information will be improved for better serve enterprises’ and citizens’ hedge needs.
11. Providing comprehends financial services to enterprises in their go-global efforts. Chinese financial institutions will be given support to expand overseas market, through cross-border mergers and acquisitions and providing cross-border RMB business, thus forming a global credit-granting, marketing, management and service system for granting. Both indirect and direct financing such as loans for domestic and overseas mergers and acquisition and syndicated loans will be provided. Leading enterprises will be encouraged to carry out strategic mergers and acquisition to extend production chain, and to make supply chain financing extended to overseas, thus enabling Chinese equipment, materials, products, standards, technology and service to go global and cultivating Chinese cross-border enterprises with core competitiveness. Enterprises investing overseas are encouraged to issue RMB bonds in destination countries and their overseas projects will be supported. There will be diverse RMB overseas investment and loan funds and funds for mergers and acquisition to support those enterprises to get upgraded, thus realizing sustained growth of foreign trade.
Branches of the People’s bank of China, please forward this Guidance to banking financial institutions and payment institutions within the administration.