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FTZ Bidirectional Cross-border RMB Pooling

-PBOC release ‘Circular to Support the Expanding Usage of Cross-border RMB in China (Shanghai) Pilot Free Trade Zone’ (Regulation [2014] No.22) has reiterated the open up cross-border RMB pooling business for in-zone companies.  (Article 5)
- Two-way RMB sweep is allowed for both domestic and overseas group companies up to the total amount of enterprise’s self capital except financing funds.
- RMB cross-border pooling scheme can be introduced to improve global fund efficiency of a group company.

Please be noted that the scheme could not be implemented at this moment, because it requires a new management system for both banks and corporates.

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Overview

Company A has conducted the intercompany loan(yen) for the subsidiary in China. In a bit to hedge the risk of increasing valuation losses in case of yen's appreciation on the subsidiary side, It also has put another balance sheet hedge transaction(foreign exchange transactions on both side of balance sheet with changed period) in place on the Head office side.

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