Shanghai’s financial authorities have issued a raft of regulations for facilitating cross-border renminbi settlement in the Lingang free-trade zone, which is home to Tesla’s Gigafactory 3.
On 5 March the Shanghai office of the Chinese central bank and the Shanghai Municipal Banking Foreign Exchange and Cross-border Renminbi Settlement Self-regulatory Mechanism (上海市银行外汇及跨境人民币业务自律机制) jointly issued the “Lingang New Area Plan for Making Cross-border Renminbi Settlement Easier for High-quality Enterprises” (临港新片区优质企业跨境人民币结算便利化方案).
The Plan outlines trials for the simplification of cross-border renminbi settlement undertaken by qualified enterprises in the Lingang New Area, with an especial focus on sectors including:
- Integrated circuits
- Clean energy
- Intelligent connected vehicles
- Smart manufacturing
- High-end devices.
The Shanghai Municipal Banking Foreign Exchange and Cross-border Renminbi Settlement Self-regulatory Mechanism will have the authority to determine which companies are included on the list of high-quality enterprises that qualify for cross-border renminbi settlement measures.
According to domestic media Tesla, whose Gigafactory 3 is located in the Lingang New area, has already taken advantage of the measures prescribed by the Plan to directly complete renminbi payments via the Shanghai Pudong Development Bank.
Measures outlined by the Plan for facilitating cross-border renminbi settlement focus in particular on areas including:
- Direct handling by banks of cross-border renminbi settlement for the goods and services transactions of enterprises based on payments instructions, as well as the transfer of renminbi funds, cross-border financing and funds raised via overseas listing, without the need for the submission of documentary materials in advance.
- Supporting the paper-free operation of banks, under the precondition that they guarantee payments security and regulatory compliance. Handling of operations based on the digital explanations or payments instructions of enterprises.
- Banks are required to issue a “Cross-border Settlement Lingang New Area High-quality Enterprise Notification Letter” (跨境人民币结算临港新片区优质企业告知书) to high-quality enterprises and retain a letter of undertaking signed by high-quality enterprises, while enterprises are required to retain documents concerning cross-border renminbi settlement transactions for at least five years.