On December 5, the Measures for the Upgrading of the Functions of Free Trade Accounts in the Shanghai Pilot Free Trade Zone (Trial Implementation) (hereinafter referred to as the “Implementation Measures”) officially came into effect, marking a new stage in the reform pilot of free trade accounts (FT accounts). Professor Lijian SUN, Director of the Financial Research Center, noted that the Implementation Measures are a policy that “appears highly technical but is in fact of substantial significance.” The most noteworthy aspects include: transforming FT accounts into “quasi-offshore accounts”; a high degree of liberalization for “cross–first-line” transactions while applying refined macroprudential quotas to strictly manage “cross–second-line” transactions; high entry thresholds for pilot enterprises, positioning the scheme as a “high-end, small-circle experimental field”; higher requirements for banks; the delineation of clear “red lines” for the use of funds; and an information reporting and monitoring system based on a data-driven, real-time regulatory framework.

The policy signals released by these key features indicate that China is using pilot free trade zones as testing grounds to advance “institutional opening-up,” with capital accieralization entering a “stress-testing” phase; that financial opening-up is being pursued in tandem with risk prevention and control, reflecting a reform approach of “seeking progress while maintaining stability”; and that policies are tilted toward the real economy, supporting high-quality enterprises in both “going global” and “bringing in.”

The significance of these measures for China’s financial opening-up and the development of Shanghai as an international financial center lies in enhancing Shanghai’s capacity for global resource allocation, providing essential infrastructure support for the internationalization of the renminbi, and exploring “replicable and scalable” experiences for nationwide financial opening-up.

Translated by Yijiao SHI

Full text in Chinese available at:

https://fddi.fudan.edu.cn/96/a2/c18965a759458/page.htm