Shanghai FTZ drives banking, insurance industry to greater heights

Shanghai's banking and insurance industry has made significant strides in financial openness and innovation in the pilot free trade zone over the past decade, and is gearing up for an even higher level of openness, aiming to inject new momentum into the development of the zone.

Established in September 2013, the China (Shanghai) Pilot Free Trade Zone has served as a strategic platform for advancing reform and opening-up in the new era. It has been at the forefront of deepening financial openness and innovation, with great achievements made in institutional reform and becoming a national "testing ground" for new policies and mechanisms.

The banking and insurance industry has played a crucial role in this journey, with the number of banking institutions in the FTZ reaching 588 and insurance institutions hitting 135 as of June 2023.

At a press conference held by the Shanghai Banking Association and the Shanghai Insurance Association celebrating the 10th anniversary of the FTZ, Wang Xinze, deputy director of the Shanghai Regulatory Bureau of the National Administration of Financial Regulation (NAFR), pledged that "the banking and insurance industry is further conducting stress tests at a higher level of openness, aiming to inject new energy and advantages into the strategic advancement of the pilot FTZ."

Looking back, institutional innovation has been a driving force behind the progress of the Shanghai FTZ. The regulatory authorities, including the former China Banking Regulatory Commission and the former China Insurance Regulatory Commission, issued eight guiding opinions to support the construction of the zone, providing a framework for financial openness and innovation.

The Shanghai Regulatory Bureau of the China Banking and Insurance Regulatory Commission has further strengthened regulatory policies by focusing on market access, special business authorization, and statistical risk monitoring.

The special business authorization has allowed banks within the FTZ to expand their offshore business, and conduct interbank and wealth management activities through the free trade account (FTA) system. As of June 2023, 49 banking financial institutions had established a FTA accounting system, accumulating total assets of 1.06 trillion yuan (US$145.39 billion).

The NAFR's Shanghai Bureau has also implemented bold trials and independent improvements to serve the high-quality development of the real economy, Wang noted.

As an example, collaborating with the Lingang Special Area Administrative Committee, they have established a tech-financial innovation pilot base, piloting new products, tools, and models to match the financial needs of technology enterprises.

Furthermore, the bureau has provided precise risk protection for industries by establishing a technology insurance innovation leading area in the Lingang Special Area. With the help of an insurance pool, integrated circuit enterprises have been provided with insurance coverage totaling 1.9 trillion yuan, ensuring comprehensive risk protection for the industry.

In terms of promoting investment and financing facilitation, the bureau has launched an "Innovative Regulatory Interaction Mechanism." This approach has supported 46 innovative pilot projects with a total amount exceeding 110 billion yuan, nurturing a favorable environment for businesses in the FTZ.

Meanwhile, various financial institutions within the FTZ have actively made efforts and scored achievements in serving the real economy.

For example, Industrial and Commercial Bank of China's Shanghai branch, one of the first pilot banks in the Lingang area, has opened 27,000 FTAs and actively promoted cross-border facilitation trials. The Shanghai branch of Shanghai Pudong Development Bank has provided internationalized professional services to nearly 5,000 customers in the FTZ, while China Export and Credit Insurance Corp's Shanghai branch has supported over 5,000 enterprises with exports and overseas investments worth US$165 billion.

The banking and insurance industry has also embraced reform and innovation in serving high-level openness. Bank of China's Shanghai branch, for instance, has pioneered various methods of account reconciliation and facilitated offshore processing and trade business. Similarly, Bank of Communications Financial Leasing Co has introduced collateral management mechanisms and expanded asset allocation scope for global offshore RMB investors.

"The banking and insurance industry is set to further enhance its role in supporting the development of the FTZ, the Shanghai International Financial Center, the Belt and Road Initiative, and the integrated development of the Yangtze River Delta region," Wang reiterated.