China's FTZ deregulation falls short

Author: Brian Yap | Published: 8 Apr 2016

The move by China's central bank to allow direct RMB-US dollar conversion in three free trade zones (FTZs) is widely seen as a step forward, but quota limits and unclear rules have drawn criticism.

The People’s Bank of China (PBOC) announced last December that it would allow limited RMB convertibility in FTZs in Guangdong, Fujian and Tianjin, following the currency's inclusion in the IMF’s reserve basket.

But local counsel have dismissed the $10 million quota imposed on multinationals based in these FTZs as too small for companies to engage in any sizeable transactions.

"The current quota given out to companies operating within the three zones is limited, especially looking at it from an investment or project financing point of view," said  Ma Feng, partner at King & Wood Mallesons in Beijing.

Under the new rules, companies registered in the FTZs are...