Chinese financial regulators vow that they will bolster capital account convertibility and the cross-border use of the yuan will expand in Shanghai’s pilot free trade zone under a new plan released on October 30.

The plan covers 40 goals which include piloting yuan convertibility under capital account, driving cross-border use of the yuan in trade, direct investment and financial investment, as well as wider opening of the financial services sectors.

The following are the English version of the detailed plans.

The guidelines are intended to accelerate capital account convertibility, cross-border use of the yuan, opening-up of financial services, and construction of an international financial market. Authorities are exploring new channels, accumulating new experiences through continuous improvement of financial regulations, enhanced link between financial reforms in the free trade zone and construction of Shanghai international financial center. They will assess the progress made, expand pilot policies, and serve the national financial reform and expansion of financial opening-up.

Yuan convertibility will be realized on a trial basis with overall planning and under the principles of serving the economy, controlling risks, and gradually progressing. The extent of convertibility under various items of the capital account will be lifted gradually.

1. Conclude experiences of free trade accounts. Yuan and foreign currency operations will be unified as soon as possible, and functions of the free trade account will be extended. Yuan and foreign currencies in the free trade account will be made convertible under prudent and cautious management.

2. Regulate conditions to open and use free trade account, and strictly apply real-name system on bank accounts. Market players are allowed to use free trade accounts to conduct cross-border trade and investment activities; banks, securities brokerages and insurance companies are encouraged to use free trade accounts to open innovative businesses; and securities brokerages and futures exchanges are allowed to use the free trade account system to explore innovative measures around information flow and cash flow between free trade accounts.

3. Qualified Domestic Individual Investors program will be initiated with operational details to be released in due course. Qualified individuals will be allowed to make overseas industrial investment, fixed assets investment and financial investment.

4. The drafting of rules will be accelerated to allow or expand qualified institutions and individuals to invest in domestic and foreign securities and futures market. Rules to manage cross-border cash flow to domestic securities and futures markets will be specified. Policies will be studied to support capital account opening-up through free trade account and trials will be started in due course.

5. A management system for overseas fundraising and capital flow will be set up under a prudent and cautious regulatory framework of the FTZ. Matching of debt currency and duration, foreign debt management, and needs of macro monetary policies will be considered comprehensively. The size of overseas fundraising, the use of the money will be reasonably controlled, while the structure of foreign fundraising will be improved and foreign fundraising risks prevented.

6. Foreign exchange management system will be innovated, and convertibility quota will be piloted within the FTZ. Corresponding goals of constructing FTZ and Shanghai international financial center, and foreign exchange management system will be further reformed. Cross-border capital flow will be relaxed to improve balanced foreign exchange capital management system. Further expansion of individual conversion quota will be studied. Under the principles of regulating each market player, non-financial corporate in the zone will be able to convert within a quota. The quota of conversion will be expanded gradually and convertibility will be realized.

The overseas use of the yuan will be expanded with equal focus on trade, industrial investment and financial investment, driving out-going of capital and the yuan.

7. Relevant rules and systems will be improved to support companies in the FTZ and their foreign parent or subsidiary to issue yuan-denominated bonds onshore. The proceeds can be used onshore and offshore according to needs.

8. With sound regulations and market demands in place, individual businesses will be allowed to support their foreign entities with yuan funding.

9. The channel for offshore yuan to flow back onshore will be expanded. Yuan-denominated financial products for international markets will be innovated, domestic investment targets for offshore yuan will be expanded, encouraging bilateral flow of the yuan.

A negative list system for market entrance will be explored and reforming trials will be carried out. A mechanism of pre-establishment of national treatment plus negative list for foreign investment in the financial services industry will be explored in accordance with high-standard international trade rules. The financial services industry will be further opened up for qualified private capital and foreign institutions.

10. To support private capital to enter the financial industry, allowing qualified private capital to set up financial institutions such as private banks, financial leasing companies, finance companies, auto finance companies and consumer finance companies.

11. To support qualified banking institutions to set up operations in FTZ through forms of corporate entity, branch, specialized institution and specialized subsidiary.

12. To support commercial banks qualified for offshore business to expand offshore business in FTZ. To expand business scope for pilot banks at an appropriate time based on risk assessment on existing trials.

13. To support the establishment of non-standard asset trading platform for institutional investors in FTZ according to national regulations.

14. To allow FTZ-based securities and futures institutions to carry out cross-industry licensing trial for securities and futures businesses.

15. To allow mutual fund management companies to set up subsidiaries specializing in index fund management in FTZ. To support insurance funds and other long-term funds to commission securities and futures institutions to carry out cross-border investment through FTZ.

16. To support securities and futures companies to carry out cross-border brokerage and asset management businesses in FTZ and to participate in offshore trading of securities, futures and derivatives on a trial basis. To allow subsidiaries of fund management firms to carry out cross-border asset management and offshore investment consultation businesses. To support Shanghai securities and futures to enter interbank foreign exchange market and to conduct spot RMB-foreign exchange transaction and trading of derivatives.

17. To support the establishment of companies for overseas equity investment in FTZ and to support qualified investors to set up overseas private equity funds.

18. To allow foreign-funded financial institutions to set up joint-venture securities companies in FTZ with foreign ownership that is no more than 49 percent and domestic shareholder not being limited to securities companies. To allow qualified foreign-funded institutions to set up joint-venture securities investment consultation companies in FTZ.

19. To support the establishment of insurance asset management companies and subsidiaries and insurance fund investment center in FTZ. To support insurance asset management institutions to set up mezzanine funds, merger and acquisition funds, real-estate funds, pension funds, healthcare funds and other private funds. To support insurance asset management companies to develop asset securitization products of insurance companies. To study catastrophe bond trial based on financial factor market.

20. To improve reinsurance industry chain. To support the establishment of joint-venture reinsurance institutions, the establishment of captive insurance companies, mutual insurance companies and other new type of insurance organizations, and the establishment of professional insurance service institutions such as insurance brokers, insurance agents, risk assessment firms, claim adjustment companies and legal consultation firms. To support reinsurance institutions in FTZ to conduct cross-border yuan reinsurance business and to purchase insurance policies worldwide. To encourage all kinds of insurance institutions to provide risk management for Chinese and overseas companies, to develop mechanisms for risk diversification in FTZ, to conduct special insurance business for energy and aerospace industries. To promote global capital to provide reinsurance support for domestic catastrophe and other special risks.

21. To support the establishment of foreign-funded health insurance institutions under the current legal framework. To explore a registration system for shipping insurance products. To research and launch shipping insurance index.

22. To support the development of Internet finance in FTZ on the premise of risk prevention.

23. To support the development of technology finance, explore revenue-based financing on a trial basis and promote entrepreneurship and innovation. To allow banks specializing in providing financial services for technology companies such as SPD Silicon Valley Bank to jointly explore revenue-based financing with venture capital firms and private equity firms with the support of the local government.

24. To research on comprehensive operation of financial industry and explore the establishment of financial holding companies on the premise of risk prevention.

25. To conduct national security review of foreign participation in FTZ experiment on financial opening up. To support financial institutions from countries and regions which have signed free trade agreements with China to set up joint-venture financial institutions in FTZ and to allow them to gradually increase their shareholding. To increase the shareholding of investors from Hong Kong, Macau and Taiwan in joint-venture financial institutions under related economic cooperation framework agreements between China’s mainland, Hong Kong, Macau and Taiwan.

26. Gather and develop various types of financial agencies such as banks, securities and insurance companies. Large financial companies will get extra support for establishing headquarters in Shanghai. Shanghai will welcome overseas financial agencies to open branches or form joint ventures, including well-known international banks, securities and insurance companies. Shanghai will support Chinese Insurance Information Technology Co in setting up an innovative branch here.

27. The free trade zone is encouraged to set up a legal-person financial institution, which would help it expand overseas.

The innovation in financial policies and openness is a source of strength for the People’s Bank of China to establish a financial platform that can involve overseas participants and thus upgrade the market’s capacity in managing domestic and overseas resources.

28. The China Foreign Exchange Trade System will receive support in building an asset trading platform to enhance services.

29. Shanghai Gold Exchange will introduce more functions to benefit investors in conducting global trading.

30. Shanghai Stock Exchange is encouraged to set up a global financial asset trading platform to attract foreign capital to participate in China’s stocks, bonds and funds markets. Research is being done to explore how overseas investors can take part in initial public offerings in China’s stock market. Based on the experience of running the Shanghai-Hong Kong Stock Connect, Shanghai exchange will upgrade its system to suit future needs from overseas investors.

31. Shanghai Futures Exchange is due to get crude oil futures listed as it moves toward a global energy trading center. Promote research on futures such as natural gas, bunker oil, and refined oil. Allow qualified overseas agencies to seek sole proprietorship or joint ventures regarding futures trading. Allow foreign traders to trade certain kinds of futures in China.

31. Shanghai plans to set up an insurance exchange to focus on insurance trading and pricing.

33. Shanghai Clearing House will provide clearing service for foreign investors and those within the free trade zone, regarding aspects of maritime finance and large commodities.

34. Shanghai will encourage financial institutes to provide entrusted shareholding services for small- and medium-sized technological companies at the free trade zone, aiming at attracting foreign investors.

Design a proper financial inspection system for the development of free trade zone and Shanghai’s construction of being a global financial center. This will enhance the prevention toward risks and create a good environment for development.

35. Improve financial inspection system. Develop a new system that complies with international standards and is also compatible to China. Simplify administrative procedures. Strengthen appraisals during and after these administrative affairs and keep archives. Build a financial credit information infrastructure that can promote the share of information. Develop a monitoring system that goes with global standards. Raise punishment level for financial mistrust and rule violations.

36. The People’s Bank of China and the foreign exchange bureau will do research on a unified system to manage both Chinese and foreign currencies. Innovate the system of foreign currency account management. Reorganize the types of foreign accounts, improve ways of monitoring to raise efficiency.

37. Enhance the ordination of financial inspection at the free trade zone and explore monitoring methods toward different functions. Use financial leveraging tool at the free trade zone to enhance the share of business and inspection information among different departments, industries and markets. Explore a new inspection system that complies with both central and local needs. Shanghai will ask for, from the national finance management bureau, some inspection functions to transit to local institutes to boost product innovation.

38. Enhance the prevention of financial risks. Improve the monitoring system for cross-border capital flow. Enhance prevention of money laundering, illegal financing and tax evasion. Given the finance institutes are normally cross-industry, market and border ones, it is key to take the initiative to create and upgrade a system that can warn, prevent and tackle financial risks.

39. Positively improve the environment for financial development. The municipal government will work with related bureaus to file a further plan to improve the financial credit system.

40. If any of the clauses do not fully comply with requirements from the central government, the Shanghai government will make a plea for adjustment from the central government.