Cross-border Funds

China further expands currency conversion programme for MNCs

While there has been a lot of focus recently on the difficulties foreign-invested enterprises (FIEs) operating in China are having with the cross-border transfer of data, the cross-border transfer of funds has also long been an issue for China branches of international companies. European Chamber members have often reported that getting funding from Chinese financial institutions can be burdensome for them as FIEs, while regulatory hurdles also make accessing their parent company’s funds a challenging task. 

In a step towards alleviating these difficulties, the monetary authorities in China have upgraded a cash pooling pilot programme, enabling multinational corporations (MNCs) in specific regions to integrate cash pools consisting of both renminbi (RMB) and foreign currency. This upgrade facilitates the cross-border utilisation of funds. The most recent revision of the pilot programme provides enhanced flexibility to participating MNCs, allowing them to determine the collection ratio for foreign debt and overseas loans. In this article, Arendse Huld of Dezan Shira examines the expansion of the China cash pooling pilot programme since its initial launch and outlines the benefits it offers to MNCs and banks. 

According to a joint announcement from the People’s Bank of China (PBOC) and the State Administration for Foreign Exchange (SAFE) on 19th May 2023, the upgraded pilot programme will now allow MNCs to determine the collection ratio of foreign debts and overseas loans by themselves, among other changes.    

The latest upgrade will initially be implemented as a pilot programme in Beijing and Guangdong. However, it is worth noting that the previous version of the pilot programme had already been expanded to multiple regions in July 2022. 


The China cash pooling pilot programme was first launched in March 2021, when the PBOC and the SAFE released a joint statement announcing that certain multinationals in Beijing and Shenzhen would be permitted to integrate RMB and foreign currency cash pools to facilitate the use of cross-border funds. 

Initially, 10 MNCs were selected for the pilot programme, five each in Beijing and Shenzhen, which included Sinochem Group, COFCO Corporation, China General Technology (Group) Holding, China Aviation Industry Corporation and Shell Group. These companies reportedly engaged in cross-border fund transactions worth a total of United States dollars (USD) 50 billion during the pilot programme’s initial phase. 

Within one year of its launch, the pilot programme in Shenzhen expanded to include 35 companies, including notable names like Walmart and Flex Ltd. In July 2022, the pilot programme’s reach was extended to additional cities and provinces, including Shanghai, Guangdong, Shaanxi, Zhejiang, Qingdao, and Hainan. Moreover, the scope of the programme itself was also expanded. 

Who is eligible for the pilot programme?  

The participating MNCs are selected by the local branch of the SAFE in each jurisdiction in which the pilot programme is running. According to the 2021 rules, the pilot programme is targeted at large multinationals with high credit ratings. In addition, the domestic and foreign member companies under the MNC must meet the following conditions:  

  1. Domestic member enterprises must have had an operating income in the previous year of at least Chinese yuan (CNY) 10 billion (USD 1.4 billion), and a total balance of payments in domestic and foreign currencies in the previous year of at least CNY 7 billion (USD 989 million). 
  2. Foreign member companies must have had a total operating income of at least CNY 2 billion (USD 282.5 million) in the previous year. 
  3. For both domestic and foreign member companies: have no record of violations of United Nations Security Council sanctions resolutions. 
  4. Domestic member enterprises must have no record of major violations of laws and regulations in the process of carrying out cross-border business in the past two years. Companies included in the list of enterprises with foreign exchange receipts and payments for trade should be classified as Class A companies and not be included in the key supervision list of companies settling in RMB for export goods trade under key supervision. 
  5. Foreign member companies must not belong to companies that are restricted and prohibited from overseas investment under the Guiding Opinions on Further Guiding and Regulating the Direction of Overseas Investment (Guobanfa [2017] No. 74).  

What can the MNCs do under the pilot programme?  

With the launch of the programme in 2021, the MNCs involved were permitted to integrate various existing cash pools to enable cross-border funds in RMB and foreign currencies between their domestic and overseas subsidiaries.  

Under the programme, the cap on foreign debt for MNCs is set at two times the accrued owner’s equity of the cash pool, which is in line with the SAFE’s 2019 Regulations on the Centralised Operation and Management of Cross-border Funds of Multinational Corporations. Meanwhile, the cap on overseas lending is set at 0.8 times the accrued owner’s equity of the fund pool. The pilot programme also facilitates the transfer and use of funds by allowing the foreign exchange settlement funds in the domestic capital account to be directly transferred to the domestic RMB capital account. Participating companies are also permitted to use domestic foreign exchange derivatives to hedge against the risks posed by currency exchange fluctuations. 

Finally, participating MNCs can purchase a certain quota of foreign currency as needed, without seeking approval from the SAFE every time they want to buy foreign currency under the capital account, and can deposit the funds raised from the purchase of foreign currencies into the domestic account for overseas payments. The quota for foreign currency purchases is determined on a case-by-case basis by the SAFE.  

In July 2022, when the pilot programme was expanded to more areas and companies, the scope of the programme itself was also broadened to include allowing MNCs to handle domestic and foreign currency centralised receipt and payment of their overseas member companies in China. Under this policy, the host company is allowed to centrally collect and pay the funds related to trade transactions between the overseas member companies listed in the cash pool and overseas trading counterparts. These transactions will take up some of the centralised debt limit recorded in the cash pool and require an international balance of payments reporting.  

Finally, in May 2023, the programme was further upgraded to allow MNCs to determine the collection ratio of foreign debt and overseas according to the macroprudential principle, thus increasing the freedom of cross-border capital operations. However, this policy is currently only being implemented in Beijing and Guangdong.  

How will the programme help MNCs and banks?  

The pilot programme brings substantial improvements to the efficiency of cross-border capital coordination and utilisation for MNCs. It enables them to effectively manage funds in both local and foreign currencies, resulting in reduced currency exchange risks and financial costs. Under current rules, RMB and foreign currency accounts must be managed separately and are subject to different rules, making coordination between the two difficult.  

Meanwhile, enabling MNCs to purchase foreign currencies more easily will significantly help to reduce the risks of exchange rate fluctuations, and facilitates the management of cross-border funds, thereby cutting exchange costs and risks. Under the current rules, foreign currency purchases must be approved by the SAFE, greatly slowing the process.  

The pilot programme is also beneficial to banks that are servicing the companies by “enhancing their overall capabilities in cross-border business services and risk management”,  according to the Beijing branch of the SAFE.  

Finally, the pilot programme also helps to advance the internationalisation of the RMB, a core goal of the Chinese Government. In the announcement of the 2022 expansion of the pilot programme, the authorities stated that the programme will facilitate MNCs to carry cross-border payments in RMB.  

Beyond the current scope of the pilot programme, the monetary authorities have stated that they will continue to optimise the programme to facilitate cross-border utilisation of mixed currency funds. It is also possible that the authorities will lower the requirements in the future so that more companies can participate, as the current bar means that the majority of companies are ineligible for the programme.  

Dezan Shira & Associates has offices in Vietnam, Indonesia, Singapore, the United States, Germany, Italy, India, and Russia, in addition to our trade research facilities along the Belt & Road Initiative. We also have partner firms assisting foreign investors in The Philippines, Malaysia, Thailand and Bangladesh.