written by Lin Han / translated by Gao Qianqian, Ma Jinyu

Guangxi Borderland Financial Reform Approaches in Expectations

written by Lin Han / translated by Gao Qianqian, Ma Jinyu

Finance is the core of modern economy. In recent years, with the advance of China-ASEAN cooperation, the fl ow of capital, products, personnel and information is accelerated and cross-border trade and investment are also sped up. To achieve higher-level economic and trade cooperation between China and ASEAN, a correspondent financial system is needed. However, the current financial system reform lags behind the reform on economic structures.

The leading group of Guangxi Borderland Financial Reform Pilot Zone just held its first plenary session in Nanning, China on April 1, 2015. Chen Wu, president of Guangxi Zhuang Autonomous Region and head of the Leading Group said at the meeting, Guangxi borderland fi nancial reforms has achieved great beginning in 2014. In 2015, Guangxi should continue to center on fi nance, cross-border fi nance and local finance, gradually increase RMB’s competitiveness, radiation and influence in ASEAN region, and make eff orts to construct the pilot zone.

Guangxi Borderland Financial Reform Pilot Zone, lying at the frontier of China-ASEAN opened-up cooperation, covers Nanning, Qinzhou, Beihai, Fangchenggang, Baise and Chongzuo. What are the main contents and objects of Guangxi’s borderland financial reform since there are particular expectations for it?

Li Zhengyou, Deputy Director of the Financial Affairs Office of Guangxi Zhuang Autonomous Region, introduced that according to the master plan approved by the national government, the construction of Guangxi Borderland Financial Reform Pilot Zone should focus on RMB internationalization to expand the scope of cross-border RMB transaction, actively explore multiple approaches for RMB account convertibility, lift the degree of trade and investment facilitation, and gradually enhance the competitiveness, influence and radiating capacity of RMB in ASEAN, trying to build Guangxi into a new strategic pivot for the opened-up development of southwestern China and south-central China and providing highquality and high-effi cient fi nancial service for the Maritime Silk Road.

With directions for action, the objects should be made clear. “The overall objective of Guangxi’s borderland fi nancial reform is to establish initially a diversifi ed modern financial system conformed to the upgraded version of CAFTA”. With regard to this, efforts must be made to further enhance the innovation capacity of fi nance, raise the level of fi nancial openingup, improve fi nancial market system, and optimize fi nancial eco-environment, so as to expand borderland economic and trade development and increase the economic capacity of fi nancial service entities. Only by doing these could the economic and trade ties between Guangxi, ASEAN and South Asia become closer.

RMB internationalization is a progressive process. What are the advantages of Guangxi to implement border financial reform and promote RMB internationalization?

Currency internationalization could not be realized overnight. It would undergo a long process when certain basic conditions are mature, which include sustained economic development, complete fundamental systems for market economy, and modernized fi nancial market systems.

“In today’s world, currency internationalization goes through three stages: first, circulation and use of currency in cash in surrounding areas; second, use of currency for evaluation and settlement in trade and financial transactions as well as currency circulation in surrounding areas, i.e., regionalization of currency, which is the initial stage of currency internationalization; last, currency becoming the reserve currency, which is the last stage”, claimed Mr. Li, who summarized RMB internationalization as “RMB peripheralization, RMB regionalization and RMB internationalization”

With the continuous expansion of trade between China and ASEAN, the ASEAN countries have witnessed a jump in RMB settlement in import and export trade, and RMB has become a “hard currency” after the US dollar, Euro, and Yen.

On the borderland of Myanmar close to China’s Yunnan, RMB has become a currency for daily use. In the capital of the fourth special administration region innorthern Myanmar, RMB has even taken the place of Kyats. And the Vietnamese authorities have legalized the circulation of RMB on its borderland. Also, RMB is used for purchase, settlement and pricing in the entire country of Vietnam and Laos. In Cambodia, the government encourages the use of RMB for settlement. In the Greater Mekong Sub-region, the local people use RMB for purchase and settlement. In Singapore, Malaysia and Thailand, RMB is accepted and used by more and more people, where RMB can be converted directly and used for purchasing in many shops.

In this circumstance, we have clear visions of the prospect of RMB regionalization, with the foundation of which RMB internationalization is almost certain. And the responsibility falls on China’s provinces and cities bordering the ASEAN countries.

At present, the conditions for Guangxi to take a lead in RMB internationalization have become mature. As Mr. Li introduced, ever since Guangxi launched the pilot crossborder RMB settlement on June 23, 2010, it has made new breakthrough points in the scale and scope of cross-border RMB settlement. RMB settlement has extended from cross-border trade to general trade, import & export trade, service trade and cross-border financing etc., shifting from serving enterprises to serving individuals, with the scope expanding from the ASEAN countries to all countries and regions. By the end of 2013, Guangxi had an accumulated cross-border RMB business of 213.5 billion yuan, ranking the first among China’s 8 border provinces/regions and 12 western provinces/regions.

How will Guangxi implement”financial projects“ to enhance the efficiency and the level of facilitation to financially serve the upgraded version of CAFTA?

In addition to encouraging financial institutions to provide cross-border RMB settlement, trading and fi nancing, making RMB trade with other currencies of neighboring countries, it is also crucial to“simplify approval procedure for foreign exchange receipts and payments”, said Mr. Li. Currently, after completing capital verification formalities, foreignfunded enterprises incorporated in China-Malaysia Qinzhou Industrial Park can resort to the bank for settlement at any time, so as to improve the efficiency of capital management and capability of exchange rate risk avoidance.

As cross-border trade grows, “the establishment of cross-border retail payment platform, and the cooperation among the third-party payment agency, unincorporated payment agency endorsed by national license and bank institutions” has become important part of Guangxi borderland fi nancial reform.“ It will provide RMB settlement for cross-border e-commerce, promoting the development of e-commerce, internet finance and logistics industry”, Mr. Li explained.

The goal of borderland fi nancial reform is to propel investment and trade facilitation, which requires continuous exploration and experiment. To this end, Mr. Li said,“ In the pilot zone, the promotion of investment and trade facilitation needs us to make unprecedented exploration on reform policies related to trade in goods, trade in services and foreign direct investment market, and promote qualifi ed individuals to conduct overseas investment and qualifi ed foreign individuals to invest in the pilot zone.”

Special location endows Guangxi with unique advantages as well as more responsibilities in its borderland financial reform. In the following process of construction, how to promote borderland financial reforms to a higher level and make exploration and innovation is imperative for Guangxi.

As for the enforcement of Guangxi border land financial reform, Mr. Li said,“To conduct inclusive financial projects by innovating financial institutions, financial markets and financial products is considered as a win-win approach". In this way, finance can efficiently serve every level of society in all directions.

First, vigorously improve the inclusive financial system. Support private capital within the pilot zone to participate in the establishment of private financial institutions like private banks, finance leasing companies and consumer fi nance companies, encourage private capital to make investment or reforms in financial institutions. Pilot project like registration services company for private financing should be launched.

Second, strongly advance the construction of inclusive fi nancial market system. Promote the financial urban integration, extend Beibu Gulf financial urban integration policies to the pilot zone and optimize the allocation of financial resources.

Third, actively foster and develop multilevel local capital markets, speed up the construction of regional equity exchanges in Guangxi, set up regional factor markets related to mine right, carbon sink right, forest right and cultural products and so on, and offer more financing choices for small and micro businesses in the pilot zone.

Fourth, give great impetus to facilitate inclusive financial products innovation, conduct pilot projects of small loans’guarantee and insurance and ease financing problems for small and micro businesses.

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