Beijing has made great progress in the implementation of policies in the field of finance for the construction of the "Two Zones". Recently, the People's Bank of China and the State Administration of Foreign Exchange (SAFE) decided to carry out the first batch of pilot programs of integrated capital pools of domestic and foreign currencies in Shenzhen and Beijing for multinational companies (hereinafter referred to as MNCs) to further facilitate the cross-border capital use of multinational enterprise groups.
"According to the pilot program, eligible multinational companies will be able to operate and manage capitals of domestic and foreign currencies in a centralized way." The personnel in charge of Business Management Department of the People's Bank of China explained that the pilot program is an integration and upgrade of the existing domestic and foreign currency pool policy, which integrates the advantages of the two capital pools' policy and releases greater policy dividends while moderately raising the entry threshold to facilitate the coordinated use of cross-border capitals by multinational companies. The pilot program of integrated capital pools of domestic and foreign currencies will further enhance the level of centralized operation of cross-border capitals of MNCs, attract more MNCs to set up global or regional capital management centers in Beijing, and help Beijing further enhance its openness at a high level.
It is reported that a total of five multinational companies in Beijing participated in the first pilot, including Sinochem Group, COFCO Corporation, China General Technology (Group) Holding Limited, Aviation Industry Corporation of China, LTD and Shell Group of Companies.
The capital pool program is a capital management tool generally adopted by MNCs. Through centralizing the operation and management of capitals of companies and enterprises in one group, it can help this group improve the efficiency of capital operation and reduce the reliance on external financing such as bank loans, thus reducing the financing cost of the group. Previously, different authorities oversaw their cross-border capital pools of domestic currency and foreign currency respectively. Among them, cross-border capital pool business of the foreign currency was under the administration of the State Administration of Foreign Exchange and the RMB cross-border capital pool business was under the administration of the Central Bank, with each of them had its own business rules. As a result, RMB cross-border payment and foreign currency capital pool business were separated, and enterprises cannot realize RMB cross-border payment through foreign currency capital pool, which was a great obstacle when conducting transactions.
In recent years, regulators have repeatedly stated their intention to introduce integrated capital pools of domestic and foreign currencies. On March 18, 2019, the State Administration of Foreign Exchange issued a document stipulating that "the main account of domestic capitals can be a multi-currency (including RMB) account, and the number of accounts opened will not be limited", which means that the capital pool under SAFE regulations is no longer limited to foreign currency, and RMB capitals can also be included in the management of cross-border capital pools, i.e. "RMB into the pool". Professionals analyze that the integration of cross-border capital pools of domestic and foreign currencies creates more favorable conditions for risk management of exchange rate of multinational enterprises and reduces their exchange costs.
It is reported that Sinochem Group quickly handled the first foreign debt borrowing business of foreign currency on the day the pilot business filing was completed, amounting to USD 10 million, and directly allocated the foreign currency foreign debt capitals to the foreign currency accounts of domestic member enterprises for settlement." The pilot integrated the policies related to capital pools of RMB and foreign currencies and achieved optimization and upgrading, and the facilitation of cross-border capital operation within the Group was significantly enhanced." The personnel from Sinochem Group said.
A number of companies participating in Beijing's pilot program said that the pilot enriched the means of cross-border capital risk control, improved the ability of risk prevention and control, increased the efficiency of capital use and saved the overall operation cost of enterprises. Especially, allowing enterprises to purchase foreign exchange at will within a certain amount helps them control exchange rate costs and decrease exchange rate risks.