China to apply some Shanghai free-trade zone policies nationwide

China plans to expand the use of some yuan policies - tested out in the Shanghai Free Trade Zone - to the rest of the country, the State Council said on Thursday, Jan 29, 2015. -- PHOTO: BLOOMBERG
China plans to expand the use of some yuan policies - tested out in the Shanghai Free Trade Zone - to the rest of the country, the State Council said on Thursday, Jan 29, 2015. -- PHOTO: BLOOMBERG

SHANGHAI (Bloomberg) - China plans to expand nationwide some of the yuan policies trialed in Shanghai's free-trade zone.

These include giving more freedom to foreign-funded companies to convert their registered capital into the local currency, and providing yuan settlement services for a number of current-account transactions by individuals, the State Council said in a statement published Thursday on its website. The changes are due to take effect before the end of June.

The announcement comes after the cabinet in December pledged to expand some of the measures tested in the Shanghai zone, which opened at the end of September 2013. The authorities lifted a cap on foreign-currency deposit rates for banks in Shanghai last year and extended a version of yuan pooling nationwide, allowing companies to make cross-border transfers of the currency without having to obtain regulatory approval.

"The central government is expected to expand more pilot measures nationwide now that the free-trade zone is in its second year," said Li Liuyang, chief financial market analyst at Bank of Tokyo-Mitsubishi UFJ (China) Ltd. in Shanghai. "However, it will stick to the principal that they will only do that when they think the timing is right and the changes won't bring any risks."

The central government will also allow foreign-invested stock-holding investment companies to be set up outside of Shanghai's free-trade zone, and apply nationwide some of the area's customs clearance procedures, according to the statement.

The zone provides a testing ground for free-market policies and capital-account opening as President Xi Jinping seeks to reduce the government's hand in the economy and financial system. The Chinese currency overtook Canada's dollar to rank fifth most-used in global payments last month, Society for Worldwide Financial Telecommunications said Wednesday.