written by Lin Min, Chen Libing / translated by Ma Jinyu

Gathering Valuable Ideas and Portraying the Blueprint of Borderland Financial Reforms

written by Lin Min, Chen Libing / translated by Ma Jinyu

The “Master Plan on Pilot Zone for Comprehensive Financial Reforms in the Border Areas of Yunnan Province and Guangxi Zhuang Autonomous Region”, which was approved by the State Council of China in 2013, has benefited the financial reforms of Guangxi Beibu Gulf Economic Zone (BGEZ). Guangxi borderland pilot zone for financial reforms is comprised by six cities, namely, Nanning, Beihai, Qinzhou, Fangchenggang, Baise and Chongzuo. All these cities are within the BGEZ except Baise. The advance of financial reform in Guangxi border areas is of great importance for the BGEZ to deepen the financial innovation.

Our reporters interviewed experts and scholars of related fields to explore Guangxi’s financial reform from different perspectives, which offered motivation for the construction of Guangxi borderland pilot zone and the financial development of the BGEZ.

Promote Cross-border RMB Settlement and Deepen Borderland Financial Reforms

Mr. Ye Dongliang Associate Professor and Doctor from College of Finance and Insurance at Guangxi University of Finance and Economics

Finance is the basis of trading and a source of power for modern economy to enjoy sustained development. As China-ASEAN trade cooperation deepens, Guangxi is also actively promoting its borderland financial reforms to meet the needs of economic development. In this regard, Mr. Ye Dongliang, Associate Professor and Doctor from College of Finance and Insurance at Guangxi University of Finance and Economics believes, cross-border RMB settlement should be taken as the breakthrough to build a “highway” for crossborder RMB fund remittance and transfer between Guangxi and ASEAN and to inject liquidity and vitality into Guangxi’s economy.

China-ASEAN Panorama:What problems still exist in Guangxi’s borderland financia reforms? How will Guangxi make use o the regional advantages to further promote borderland financial reforms?

Mr. Ye Dongliang:It still has room to move forward, though Guangxi’s borderland financial reforms have obtained great achievements. Based on foreign trade, Guangxi should enjoy preferential policy to be the pioneer in financial reforms and make itself China’s largest borderland for crossborder RMB settlement. Two breakthrough points are required to expand its cross-border settlement. The first one is to expand the basis for trade. Trade is one of the foundations for cross-border RMB settlement. So, Guangxi needs to expand its trade scale in ASEAN by strengthening the infrastructure, such as transportation and logistics, so as to build itself into a main ASEAN-oriented channel in South and Central China. In other words, Guangxi’s trade basis can be expanded through “trade activities” conducted by other provinces/regions.

The second one is to gain the policy support and make Guangxi an easy channel for China to invest in ASEAN. Guangxi’s borderland financial reforms include both funds introduction and foreign investment. Guangxi will become a capital output channel for China’s investment in ASEAN, if one of its six cities get state-level licensing policies to achieve free settlement when making foreign investment and exchange under the capital projects. In this way, crossborder RMB settlement will get prosperous and abundant capital will be injected into Guangxi’s economy.

China-ASEAN Panorama:China-ASEAN Currency Business Center was founded in 2014. Also, the personal cross-border RMB settlement business is extended to six border cities. What should Guangxi do in the future to define the priorities of its borderland financial reforms based on unbalanced economic development of six cities?

Mr. Ye Dongliang:Breakthrough progress has been made by six cities in financial system innovation after the implementation of borderland financial reforms. According to their own location advantages, economic development levels and needs, the six cities should well position themselves and avoid homogeneous competition.

Nanning, the capital of Guangxi, should build itself as the regional financial center and perfect financial market system and functions via funds introduction and investment in ASEAN. Chongzuo and Fangchenggang, neighbors of Vietnam, should continue to facilitate the border trade development and establish ASEAN-oriented currency exchange. Beihai and Qinzhou should fully utilize their port advantages, set up industrial parks, explore cross-border RMB settlement business and offer enterprises “green channel” in the areas of exchange settlement etc. Replying on the existing economic situation, Baise should plan to be the radiation area of early-developing region and promote financial reforms related to resource industry development like non-ferrous metals when conditions are ripe.

Stones from Other Hills May Serve to Polish the Jade of This One

Mr. Liang Haiming Economist from Hong Kong, China and Researcher from Pangoal Institution

Financial reform gets great attentions of the region as well as the whole world. Advanced reform experience brings inspiration to Guangxi’s borderland financial reforms. All successful experience from developed countries and Shanghai Free Trade Zone are worth learning. According to Mr. Liang Haiming, an economist from Hong Kong, China and researcher from Pangoal Institution, Dongxing, as a part of Guangxi borderland pilot zone for financial reforms, should take reference from Hong Kong’s “Octopus Card” to realize electronic payments both in Dongxing, China and Mong Cai, Vietnam.

China-ASEAN Panorama:What advanced management and reform experience can we learn from Guangxi’s borderland financial reforms and the deepening financial innovation of BGEZ?

Mr. Liang Haiming:Octopus Card is an electronic toll system adopted in Hong Kong. It is the world’s first and the most successful electronic currency, serving as a model for many countries and regions to develop their electronic currency system.

By virtue of its experience, Octopus Cards Limited, as a private enterprise in Hong Kong, won its contracts for developing electronic fee collection system in Netherlands, Changsha (China), Auckland (New Zealand) and Dubai (United Arab Emirates). In 2012, Octopus Card has released Octopus Card 2 in 1 Co-Branded Card with Lingnan Tong Card and Shenzhen Tong Card respectively.

30 million Octopus cards have been issued so far. It was primarily used for public transport and retail business, and then became the access card for some commercial activities. Cardholders initially topup their cards with Octopus’ own stored-value machines. Now, top-up points can be found at shop checkout stands and the recharge can be done via credit card and bank card.

Learning from Octopus Card’s concepts, Dongxing could work with Mong Cai to jointly launch the electronic currency and release“Dongxing-Mong Cai Pass Card”, which can pay and store in RMB. The card should be primarily used in cross-border economic cooperation zone, and then be adopted in Dongxing and Mong Cai.

The border trade bank based on electronic currency could be set up in the future as long as the card is wildly adopted in Mong Cai, even in Vietnam, thus to promote the RMB internationalization.

Take Active Actions and Advance Opening-up Steadily

Ms. Teng Lili Associate Professor from College of Commerce at Guangxi University

The offshore RMB market is blossoming, as the pace for RMB to go global accelerates. The overseas capital stock is expected to reach 260 million yuan. RMB's go global is the foundation for its internalization. With the sharp expansion in overseas stock, holders will have desire to pay or invest in RMB. Teng Lili, Associate Professor from College of Commerce at Guangxi University believes, in the context that the capital account is opened, it is important to strengthen supervision orderly and steadily, and summarize experience, which will bring us closer to our goal.

China-ASEAN Panorama:The RMB holders will have demand for investment when RMB offshore stock reaches a certain amount. What are the channels for investment? What are the positive significance for borderland financial reforms and RMB internationalization as RMB capital account is gradually opened?

Ms. Teng Lili:Investment is an important approach to capital flows. Chinese and foreign investors make RMB circulate by investing in stocks, bonds or other financial products. At present, QFII (Qualified Foreign Institutional Investors) is a major channel for foreign residents to invest in China’s financial markets. Guangxi borderland pilot zone for financial reforms is making actively attempts. As the work progresses, Guangxi Beibu Gulf Equity Exchange Co., Ltd. is expected to trade financial products between China and ASEAN. This not only provides paths for RMB backflow, but also enhances the degree of openness of capital markets in Guangxi borderland pilot zone for financial reforms.

China-ASEAN Panorama:Some uncertain factors may appear in the process of opening the capital market. Which problems should Guangxi pay attention to in promoting the openness of RMB capital account?

Ms. Teng Lili:As a pilot area, Guangxi borderland pilot zone for financial reforms aims at utilizing its border advantage and sound environment for border trade, and making promotion after experience summary, which is a kind of financial risk management and control. The opening of the world’s financial markets brings higher freedom of currency circulation, as well as stricter currency supervision and regulation. Therefore, strengthening international cooperation in financial supervision and regulation is an effective way to control the opening of capital market in a reasonable range. In addition, it is also crucial to well adjust the rhythm to open the market steadily and orderly.

With favorable location advantages and policy advantages, Guangxi should take active actions, encourage financial institutions to set up overseas branches, support nongovernmental institutions and organization to involve in the construction of borderland financial reforms, open wider to meet challenges, summarize experiences and make steady headway, thus to get closer to the goal.

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