Inbound and Outbound Investment News in the Shanghai Free Trade Zone

The New Shanghai Pilot Free Trade Zone (FTZ) brings out a significant number of improvements in the field of cross-border investment. Historically heavily regulated in China, cross-border investments know an important deregulation effort in the FTZ. Let us look both at outbound and inbound investment.

First, about outbound investment. Companies in the FTZ will be able to directly invest abroad without pre-approval, just a record-filing procedure. They will also be able to process currency exchanges, payments, and receipts for direct outbound investment with the banks inside the FTZ, with no further requirements.

As for individuals, qualified individuals working in the FTZ will be permitted to conduct direct outbound investments without the mean of a Chinese Qualified Domestic Institutional Investor. The income money they earned within the FTZ can be transferred to offshore accounts as well.

As of now, it is not clear whether these investments will be subject to quota regulations or not.

Let us now talk about inbound investment. The current Chinese laws require that foreign companies engage a Qualified Foreign Investment Institution in order to be able to invest in mainland securities. Within the FTZ, however, financial institutions and companies will be able to directly invest in and trade in securities and futures listed on Shanghai exchanges.

Two other ground-breakers : first, foreign companies with subsidiaries in the FTZ will have the occasion to issue bonds in renminbi. Second, foreigners working in the FTZ (owning special investment accounts with financial institutions in the FTZ) will be able to invest in all mainland China share securities markets, which is currently impossible for foreigners outside the FTZ.

Source : LexisNexis.hk