Shanghai Free Trade Zones showing signs of payment activity

Written by || February 20 2014

After what seems like forever, on February 18th, the regulators gave us a milestone reform for cross-border trade.

Allinpay, 99Bill, China Pay, Dongfang Electronics and Shengpay are now allowed to process cross-border payment in Chinese Yuan (RMB) for cross-border trade in the China (Shanghai) Pilot Free Trade Zone. Under the program, companies that have online payment service licenses and are either incorporated in Shanghai or run subsidiaries in the free-trade zone could open a cross-border RMB account at the Shanghai branch of Industrial and Commercial Bank of China, Bank of China, China Construction Bank, China Merchants Bank and China Minsheng Bank

Basically, cross-border RMB payment could facilitate further RMB denominated transactions between domestic and foreign parties. The RMB is now the 8th most-used currency for payments as of December 2013 and overtook the euro as the second most-used currency for trade finance in October 2013.

Although the preferential policy for cross-border yuan payment is in place, the number of enterprises that can support such a service is few at present. Foreign companies need to open RMB accounts and get approval from the administration in order to support RMB cross-border payment. So for now, Chinese consumers still suffer currency risks when purchasing goods from EBay or Amazon. Activity of payments in Shanghai FTZ is now on the rise.