China's central bank expands policies on multinationals' cross-border funds

China has further expanded the scope of a pilot program that facilitates and optimizes cash-pooling services for multinational companies, in accordance with the guidelines of the Central Economic Work Conference, the People's Bank of China (PBC), the country's central bank, said in a statement on Thursday.

The move aims to improve financial services, stabilize foreign trade and investment, and better support the high-quality development of the real economy, said the PBC.

The statement said that the PBC will work with the State Administration of Foreign Exchange to add a total of 16 localities including North China's Tianjin Municipality, Southwest China's Chongqing Municipality and Southwest China's Sichuan Province, as well as the city of Xiamen in East China's Fujian Province, into a pilot program in which multinational companies enjoy more facilitation in managing cross-border funds.

Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times on Thursday that the move, which involves more localities, is a further step in the nationwide financial sector opening-up as the country's capacity in managing cross-border capital flow strengthens.

The expansion follows a previous round of optimization in December, in which 10 localities and cities were involved.

The pilot program, which updates and improves policies on the centralized operation of cross-border funds in local and foreign currencies for multinational companies, was first implemented in 2021 in Beijing and Shenzhen.

Specifically, multinational companies will be granted greater freedom in managing cross-border funds and will have their mandate about the proportion of foreign debt and offshore lending in accordance with macro-prudential principles. They will also enjoy facilitation in conducting cross-border payments and receipts using the yuan. Relevant approval and record-filing procedures will be streamlined.

"We will improve financial services related to financing, settlement, and foreign exchange," according to the Government Work Report, which was approved on Tuesday at the closing meeting of the third session of the 14th National People's Congress.

"We will keep working to foster a first-rate business environment that is market-oriented, law-based and internationalized, thus enabling foreign-funded enterprises to achieve even greater business success in China," per the Government Work Report.

By offering more facilitation for foreign companies in the process of financing, settlements and receipts, the country's appeal to foreign companies will further increase, Xi Junyang said, noting that the move will also be conducive to the internationalization of the yuan.

As of the end of 2024, the yuan's share in global payments ranked fourth, while its share in global trade financing stood at third, indicating a steady rise in the internationalization of the yuan, according to data released at a PBC conference in February.