Favorable cash-pooling policy good for FDI

The People's Bank of China and the State Administration of Foreign Exchange are to optimize the pilot cash pooling program, integrating domestic and foreign currency management for multinational corporations in 10 provinces, municipalities and cities including Shanghai, Jiangsu province and Zhejiang province. They announced the decision on Tuesday.

Following China's steady and high-level opening-up, there has been an increasing demand for facilitating cross-border capital operation and management. As early as March 2021, the PBOC and SAFE initiated the first batch of pilot cash pooling programs, integrating domestic and foreign currency management for multinational corporations in Beijing and Shenzhen. In July 2022, the pilot was expanded to some other places, consisting of provinces, municipalities and cities.

This time not only has the pilot scope been expanded to include Jiangsu and Hainan provinces, but measures such as allowing intercompany loans in different currencies among different member enterprises of multinational corporations have also been adopted. These measures aim to reduce the financing costs for enterprises and make it more convenient to make cross-border payments.