China's central bank will support Shanghai to pilot the free exchange of renminbi and explore the free flow of capital to facilitate cross-border trade and investment, an official said on Tuesday at a press conference introducing Shanghai's further opening-up.
The People's Bank of China will back up Shanghai's trial in the free use of RMB, further facilitate the free flow of enterprises' trade and investment funds, and explore the free flow and free convertibility of capital in its Lingang Special Area, said Wang Xin, director-general of the PBOC's Research Bureau.
Wang noted that the free convertibility of RMB and the free flow of capital should meet anti-money laundering, anti-terrorist financing and anti-tax evasion regulatory requirements.
The RMB is convertible for trade purposes under the current account, but it is not freely convertible under the capital account, which covers portfolio investment and borrowing.
Some say the financial hub Shanghai, especially, should do more in this respect. The move will be conducive to foreign investors who have a growing willingness to hold RMB financial assets, as Shanghai is becoming a center for RMB assets allocation, pricing and risk management.