(Yicai) Dec. 4 -- The Shanghai Free Trade Zone’s corporate free trade accounts will get their biggest upgrade in a decade tomorrow, allowing businesses to transfer funds offshore directly and further positioning the Chinese city as a global financial hub.

The change will permit eligible pilot companies to independently move funds between domestic, overseas, and offshore accounts through the FTZ’s cross-border first-tier channel. It will also enable them to directly manage currency conversions, cross-border payments and receipts, and overseas fund balancing within a single account system.

The move was announced by the Shanghai branch of the People’s Bank of China, the country’s central bank, at the end of last month.

Eligible firms need to have been registered for more than a year, have owner’s equity of no less than CNY200 million (USD28.3 million), annual operating revenue of at least CNY1 billion (USD141.5 million), and a balance of payments of more than CNY100 million. Priority will be given to those located in key areas, such as the Lingang Special Area.

Pilot companies will also be able to conduct cross-border financing and overseas lending without being subject to traditional quota controls or differential constraints. They will no longer need to go through the mandatory filing, review, or special account opening procedures.

The upgrade will cut fund collection and allocation times for multinational and trade-focused companies to one day from the transaction day plus three days, potentially slashing financial costs, Zeng Gang, chief expert at the Shanghai Institution for Finance and Development, told Yicai.

Moreover, eligible firms will be able to more flexibly allocate cross-border funds, Zeng noted. For example, multinationals will be able to take advantage of the interest rate differentials between the domestic and foreign markets to optimize their financing arrangements.

The efficiency of fund collection and allocation for trade firms will be greatly enhanced, and domestic small- and medium-sized enterprises will be able to secure more low-cost foreign financing, he added.

“Banks’ cross-border operations will transform from simple channel roles into comprehensive service providers, expanding from basic settlement to global cash management, risk hedging, and cross-border investment and financing,” Zeng said.

Free trade accounts have played a big role in facilitating cross-border transactions over the past decade, but they still have issues such as the separate management of domestic and foreign currencies, review on a transaction-by-transaction basis, and a long trans-border payment and settlement chain, Zeng explained.

The account upgrade strikes a competitive balance between cost, risk, and efficiency, lowering corporate finance costs while improving risk management precision, according to Ma Wenjie, director of the Shanghai Institute of International Finance Center at Shanghai University of Finance and Economics.

“It can reduce firms’ financial costs and also improve the accuracy of their risk management,” Ma said.

The new system could serve as a model for other free trade zones nationwide, laying a foundation for building China’s high-level open economic system, Zeng pointed out.

With these upgraded accounts, Shanghai’s cross-border financial openness will enter a new phase, expected to attract more multinationals to set up regional cash centers and accelerate the city’s push to become a global financial hub, according to industry insiders.

Editors: Tang Shihua, Futura Costaglione