Citi launches automated Renminbi pooling for its Shanghai FTZ clients

Chinese Yuan funds can be moved freely between onshore and offshore entities

Another change to the Chinese Yuan forex market is on the way, as Reuters reports that Citi has set up a cross-border facility that enables Shanghai Free Trade Zone based multinationals to move funds freely between their onshore and offshore entities. Up until now there was a substantial list of document filings and bureaucratic procedures that companies had to go through before they could transfer funds.

Citi has developed the solution to accommodate the needs of Swiss pharmaceutical heavyweight Roche – obviously it will serve as a template for future needs of Shaghai Free Trade Zone members. The new regulatory framework that is being tested with the FTZ effort is considered to serve as a template on how the Chinese Yuan be eventually allowed to be free-floated on the international forex market.

One of the most substantial reforms that are necessary for ongoing long-term growth of the Chinese economy is the liberalization of currency flows. Several big banks have received permission to operate within the Shanghai Free Trade Zone such as Deutsche Bank, Citibank, DBS, Hang Seng Bank, HSBC and Bank of East Asia.

Consider this only as a start of similar services, as according to the Reuters report, last week HSBC has offered cross-border sweeping to a US conglomerate which is member of the S&P 500. With the serious efforts unleashed by the new Chinese government, the Chinese Yuan has already overtaken the Euro as the second most used currency in trade finance according to global leader in transaction services SWIFT.

Chinese authorities might also pay close attention to another BRICS member who is aiming at full currency convertibility – LeapRate has already reported on the plans of Russian authorities to free-float the Russian Ruble. The structure of the international forex market will change quickly in the next couple of years and forex brokerages need to adapt fast and start offering Emerging Markets currencies for trading as soon as possible.

For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.

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