CHINESE authorities appear more relaxed about cross-border capital flow, as China’s renminbi and FX reserves stabilize. Although cross-border transfers still require approval from the State Administration for Foreign Exchange (SAFE) and the People’s Bank of China (PBoC) , recent successful cross-border cases show the efforts of the Chinese regulators to further open the domestic market to international investors.

“A year ago, if you put down in the application (for a panda bond) that you want to take all proceeds out, I am sure that you will be at the bottom of the pile,” recalls a managing director at an international bank. “(More recently) we have seen the acceptance of regulators to take money out. In some cases, 100%, in some cases, you negotiate, it is 50%.”

In early February, the Government of the Emirate of Sharjah issued its debut two billion yuan (US$320 million) panda bond. According to the managing director, the issuer got approval from PBoC, and is able to take the money out and the proceeds are then swapped into US dollars and then swapped into United Arab Emirates Dirham.

On the transaction banking side, offshore issuers are also able to raise renminbi through cross-border renminbi direct loans. In the past, cross-border direct loans used to be only available in places with local regulations in place, such as Shanghai Free Trade Zone and the Shenzhen Free Trade Zone.

Aside from going through the two free trade zones, issuers can now also apply to the PBoC (but not to SAFE) for cross-border renminbi loans, and may get approval if they can justify the purpose of the transaction. In the past, PBoC only approved renminbi loans under trade accounts, but may now also approve loans under capital accounts. A source told The Asset that a Chinese corporate offshore entity successfully raised cross-border renminbi loans for a Brazilian electricity project through a Fuzhou branch of a Chinese bank in 2017.

On the other hand, cross-border cash pool and sweeps have been inconsistently suspended since early 2016. According to a senior product manager at a Chinese bank, large LLCs and MNCs with cross-border cash pool structures in place are still able to do cross-border sweeps, while those applying for a new cross-border cash pool are still required to go through regulatory approval. In April 2017, PBoC relaxed the requirement for banks to maintain a balance of inflows and outflows when processing cross-border renminbi payments.

With the growing use of distributed ledger technology, transaction banks are able to move cross-border liquidity in a fast manner within the same banking ecosystem.

In January 2018, the PBoC issued a circular to simplify cross-border renminbi payments of foreign companies in China. It is believed that the suspension of cross-border cash pool is just the ‘correction’ of the unintended ‘mistake’ of high capital outflow, which was negatively affecting the macroeconomic environment.

“Correcting mistakes does not equal to closing the door,” a senior banker at a Chinese joint stock commercial bank tells The Asset.