Shanghai’s Renminbi Convertibility Pilot Sees Surging Growth in 2021

Shanghai’s pilot program for greater convertibility of the renminbi saw surging growth in 2021, amidst trade tensions with the US and global uncertainty in relation to the COVID-19 pandemic.

The renminbi trading volume of companies using “free trade accounts” in Shanghai increased by 47% in 2021 compared to the previous year, according to data released by the Shanghai office of the People’s Bank of China (PBOC).

The accounts permit the conversion of the renminbi by businesses with fewer procedural requirements and far greater convenience.

The renminbi proprietary trading volume of banks using free trade accounts under the convertibility pilot program surged by 66% in 2021.

The program, which was first launched in 2015, is part of gradual measures to achieve full currency convertibility in Shanghai, which has been designated by the Chinese central government as the country’s international financial centre.

Shanghai’s Lingang Special Area was the first area to see the launch of the free trade accounts, as part of plans to transform it into an internationally competitive special economic zone.

Lingang’s cross-border two-way remind capital pool saw growth of 14% in 2021 to more than 400 billion yuan (around USD$63 billion). As of the end of 2021 over 130,000 free trade accounts were in operation, for a near doubling compared to three years previously.

“You can think of it as a special account system connecting with the offshore and global markets,” said Qian Jun, professor and executive dean of Fanhai International School of Finance of Fudan University, to state-owned media.

“The progress that Shanghai made in renminbi free convertibility has been very outstanding compared with the rest of the country, and more ‘bridges’ linking the domestic and foreign account systems and markets in addition to the FT account is the clue for renminbi to make strides on its way to internationalization, especially catering to the needs of holding the currency for investing purposes.”

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