May 6 saw the official launch of multi-function free trade accounts (EF [Electronic Fence] accounts) in the Hainan Free Trade Port (FTP). By midday, ten banks in Hainan had successfully launched EF accounts, opening accounts for 34 companies.

A counter dedicated to EF account services has been opened at the Hainan branch of the Bank of China. (Photo: Hainan Daily App)

In just a single day, 34 fund transfers totaling CNY 284 million (approx. $40 million) had already been transacted through EF accounts, including trade receipts and payments, foreign investment, overseas lending, foreign debt, foreign exchange settlement and sales, working capital loans, and letter of credit financing.

Fund transfers from EF accounts follow the principle of “free flow of funds across the 'first line,' cross-border transaction management of fund transfers across the 'second line,' and limited fund transfers across the 'second line' to accounts under the same name."  Implementing a "ring-fence" around EF accounts, thereby separating them from existing local and foreign currency accounts, provides the basic conditions for the free and convenient cross-border flow of funds between the Hainan FTP and overseas, furthering the high-level liberalization and facilitation of trade and investment.

Fang Xin, director of the Hainan provincial branch of the People's Bank of China, explained the fund transfer rules for EF accounts. The transfer of funds between EF accounts and overseas accounts, offshore accounts (OSA accounts), non-resident accounts (NRA accounts), and other EF accounts represents the "free flow of funds across the 'first line.'" The strictly regulated transfer of funds between EF accounts and domestic CNY settlement accounts (including personal and institutional accounts) represents "cross-border transaction management across the 'second line.'"

The limited transfer of funds from EF accounts by businesses to their own ordinary domestic accounts to meet their capital management needs represents "limited fund transfers across the 'second line' to accounts under the same name." Such transfers are subject to "negative list" management.

Hainan Ausca International Oils and Grains Co., Ltd. was one of the first companies to open an EF account. Zhang Hui, chairman of Ausca, stated that the company's transaction volume is expected to exceed US$1 billion next year. Through its EF account, it intends to leverage domestic foreign exchange and interest rates to conduct cross-border business: "Saving a few cents in CNY for every US dollar can save us tens of millions in the long term, lowering costs and boosting efficiency."

The ten banks that have launched EF account services are the Hainan branches of the Bank of China, China Construction Bank, Bank of Communications, Industrial and Commercial Bank of China, and Agricultural Bank of China, and the Haikou branches of CITIC Bank, Shanghai Pudong Development Bank, China Merchants Bank, China Everbright Bank, and China Industrial Bank.