Q&A

One often overlooked feature of the Shanghai FTZ is the unique advantages it affords foreign investors for transferring funds between their China domestic and overseas entities via two-way cash pooling. This refers to a transaction in which banks facilitate multi-national companies in moving capital between their onshore subsidiaries to an offshore headquarters (or vice versa) via inter-company loans. Companies use cash pooling for a variety of purposes, such as to deploy greater liquidity, more efficiently manage finances, or obtain a better deposit rate than in the revenue’s country of origin. Cross-border cash pooling only recently became possible in China with the lifting of the ban on such activity in the Shanghai FTZ in February of this year. While the People’s Bank of China has announced that cross-border RMB cash pooling will soon be available nationwide, the FTZ retains the unique ability to offer forex cash pooling.