Shanghai Bank: Based on the Frontier of Financial Reform and Innovation, Striving Ahead in Free Trade for Ten Years

This year marks the beginning of fully implementing the spirit of the 20th National Congress of the Communist Party of China, as well as the 10th anniversary of the establishment of the Shanghai Pilot Free Trade Zone and the beginning of a new round of development in the new area. Over the past decade, this national strategy, which started as a pilot project in Shanghai, has now blossomed across the country.

Over the past decade, Shanghai has taken the pilot free trade zone as a breakthrough point, led by economic system reform, increased its efforts in reform, comprehensively deepened systematic measures of opening up and innovation, and actively promoted the construction of Shanghai International Financial Center. Shanghai, as an international financial center and science and technology innovation center, has significantly improved its market vitality, resource cohesion, and economic radiation.

Over the past decade, Shanghai Bank has actively seized the policy opportunities of deepening opening-up and reform, targeted advanced domestic and foreign peers, deepened strategic transformation, and actively engaged in the "free trade experiment" in the financial field. Under the guidance of the "boutique bank" strategic vision, Shanghai Bank has achieved more than 30 first orders in cross-border investment and financing, domestic and foreign currency fund pools, and has been selected as an innovative case in the free trade zone multiple times, becoming a pioneer in financial innovation in the free trade zone.

Free trade business has become a driving force for transformation and development

On September 29, 2013, the Shanghai Pilot Free Trade Zone Branch of Bank of Shanghai was established on the same day as the China Pilot Free Trade Zone, becoming one of the first eight Chinese banks to enter the free trade zone.

It can be said that the decade of free trade has been a decade of financial innovation and a decade of Shanghai Bank's breakthrough in innovation and development.

In the past decade, significant changes have taken place in the hot land of the Free Trade Zone. From original practice to strategic improvement, this area has always been committed to promoting high-level opening up to the outside world, and the Shanghai Bank Free Trade Zone Branch has grown and grown along with this hot land.

In May 2014, the free trade ledger accounting system was officially launched. As one of the first five financial institutions to connect with the central bank's ledger accounting units, Shanghai Bank signed the first FT account opening agreement with well-known logistics enterprises in the region, and successively carried out trade financing, exchange rate swaps, foreign investment, and letters of credit under the FT account system.

In February 2015, seizing the policy opportunity again, we pioneered the pilot business of foreign exchange centralized operation for investment oriented multinational company fund management headquarters in the industry. We successfully provided a series of comprehensive financial services, including fund custody, interbank credit, financial derivatives, etc., for member enterprises, and once again established the brand of free trade zone business. In the same year, Shanghai Bank broke the constraints of traditional financial concepts that relied on net assets, collateral, and guarantees as collateral, and replaced the past oriented "static investment" with a future oriented "forward investment" concept. It successfully issued US dollar and purchase loans to internationally renowned private equity investment funds, helping them participate in the reform of state-owned assets and enterprises.

In 2016, it helped large securities companies establish a US dollar fund focused on investing in domestic infrastructure. Through professional policy consultation and optimization of investment paths, it successfully assisted in building cross-border investment channels for free trade zones and introduced high-quality foreign capital to invest in domestic infrastructure construction.

In 2017, we successfully collaborated with Unicorn Technology Group in the field of artificial intelligence to establish a cross-border RMB two-way fund pool business, promoting the development of the new real economy by serving intelligent technology enterprises.

In 2018, we coordinated the cross-border listing needs of domestic intelligent business service providers, assisted enterprises in efficiently completing the construction of red chip structures, and promoted the process of overseas listing for enterprises. Relying on its own capital management and cross-border business advantages, it provides enterprises with professional and comprehensive financial services, focuses on the "the Belt and Road" initiative, and becomes a bridge and link for enterprises to go abroad

Over the past decade, the free trade zone business has become a driving force for Shanghai Bank's innovation driven and transformational development.

During the ten-year journey, there were two time points worth remembering: in November 2017, the Shanghai Bank Free Trade Zone Branch relocated from Waigaoqiao to the headquarters of state-owned enterprises in the World Expo Park, moving from its initial location to a broader world after expansion. At the beginning of 2023, in order to better serve the construction of Pudong's "leading zone", free trade pilot zone, and Lingang New Area, under the decision and deployment of the headquarters for institutional adjustment in Pudong, the Shanghai Free Trade Pilot Zone branch relocated to Lingang New Area, further enhancing the institutional capacity to serve Lingang New Area.

In deepening its business in the Lingang New Area, Shanghai Bank has always been committed to fulfilling the responsibilities of state-owned financial institutions through practical actions.

On the one hand, deepen regional docking. Establish a docking mechanism, actively undertake the construction of major strategic projects such as regional scientist communities, port core plots, and intercontinental brand upgrades, fully participate in various major regional activities, and successfully hold the "100 trillion dollar" digital trade special event. Customized online convenience services, utilizing its unique Huafu Tong card to achieve domestic QR code consumption settlement through virtual card online recharge and automatic redemption, providing convenient financial services for multinational enterprise short-term business trip employees in China.

On the other hand, exploring business innovation. Focusing on innovation in inclusive business, the first batch of online guarantee business for Shanghai's banking industry has been launched, enhancing the efficiency of inclusive business services. Focusing on financial innovation in the park, Shanghai Bank has established the "New Area Science and Technology Innovation Enterprise Employee Equity Financing and Equity Incentive Loan" and released a batch credit plan for the "Nest Building and Phoenix Attraction" park loan. Focusing on cross-border business innovation, we pioneered the innovative solution of using FTE accounts as QFLP custody accounts.

Innovate the "experimental field" and establish the business "innovation brand"

Ten years of spring and autumn harvest, ten years of vigorous progress.

Since its establishment ten years ago, the Shanghai Pilot Free Trade Zone has fully played the role of a "test field" for financial innovation, synergistically promoting exchange rate and interest rate reforms, financial market opening, and RMB internationalization, effectively enhancing investment and financing facilitation and international business capabilities. Shanghai Bank has always been a pioneer and pioneer in financial innovation and reform practices.

Over the past decade, financial innovation breakthrough cases have been recorded in the development history of Shanghai Bank.

Cross border merger and acquisition fund comprehensive financial services were a business gap in the banking industry before the establishment of the free trade zone. In 2014, Shanghai Bank became the first bank to try. On the basis of the cross-border investment policy in the free trade zone, Shanghai Bank provides financial products such as cross-border direct loan USD M&A loans, fund custody services, fund administrative management services, fund establishment services, cross-border investment policy consulting services in the free trade zone, and overseas direct investment business. It has set up two M&A funds through the free trade zone for cross-border investment and provided comprehensive financial services for overseas acquisitions. In just 20 days, it has completed the plan formulation, approval process, and fund transfer, successfully assisting Company A in completing this acquisition.

This project is the first attempt of cross-border investment policy in the free trade zone, achieving an increase in trade scale and a transformation of trade methods driven by cross-border investment in the free trade zone, and making important breakthroughs in investment facilitation. For the banking industry, it is an effective attempt by banking and financial institutions to promote cross-border investment financial services, which effectively meets the needs of overseas enterprises and domestic "going global" enterprises to expand investment fields and improve investment efficiency. It directly supports more Chinese enterprises and Chinese capital to go abroad, helps to enhance China's international competitiveness, and is a successful practice in promoting institutional and financial innovation.

Industry insiders are aware that before the implementation of the cross-border outward investment facilitation policy in the pilot free trade zone, enterprises need to obtain approval from relevant departments of multiple countries for outward investment, which takes at least 2-3 months; Before transferring funds for external investment, enterprises need to apply for foreign exchange registration for direct investment with relevant departments, and then go to the bank for account opening and fund transfer operations. Multiple submissions of materials and cumbersome procedures are required; Before the specific operating rules for free trade accounts were introduced, enterprises were unable to conveniently and efficiently transfer funds overseas, and could not refer to offshore prices to enjoy exchange rates closer to the international market.

After the establishment of the pilot free trade zone, enterprises within the zone changed their foreign investment to a record system. By utilizing the delegation of foreign exchange registration authority for direct investment, enterprises only need to submit relevant materials to the bank to complete a series of procedures such as foreign exchange registration, account opening, and fund transfer in one go.

The story of the first innovation takes place here——

R Company is a company established in May 2014 by T Company in the pilot free trade zone, mainly engaged in investment management business. T Company plans to cooperate with European and American enterprises to acquire the other party's factories and production lines through its subsidiary R Company in the region. According to the bidding contract between the two parties, the purchase price must be transferred overseas within 10 working days after the contract is signed, in order to achieve the acquisition of the investment target. After receiving the demand from the enterprise, the Shanghai Bank Free Trade Zone Branch promptly accepted and completed the foreign exchange registration business for direct investment by the enterprise, and opened an FT account for the enterprise. On the same day, the bank received the telegraphic transfer application submitted by the enterprise, and could carry out a series of operations such as position transfer, foreign exchange purchase, and fund transfer under the FT account through the free trade account. The funds were received the next day. Shanghai Bank assisted enterprises in smoothly transferring their cross-border investment funds overseas within the contractual period, and utilized the FT account system to achieve exchange rates closer to the international market, ultimately successfully landing the merger and acquisition business.

It is worth mentioning that, on the basis of successfully completing this cross-border merger and acquisition, Shanghai Bank also provides cross-border RMB fund pooling services for its group companies and domestic and foreign subsidiaries, improving fund management efficiency and reducing the cost of transferring funds; Provide cross-border loan services for its overseas subsidiaries, further boosting the company's strength and growth in the international market.

Over the past decade, Shanghai Bank has been brave enough to take the lead and explore boldly through practice. It has created more than 30 first orders in cross-border investment and financing, local and foreign currency fund pools, overseas interbank loans, FT account applications, and other businesses. It has been selected twice as an innovation case in the free trade zone issued by the Shanghai Municipal Financial Office and won the "Free Trade Zone Enterprise Innovation Case Award" issued by the Free Trade Zone Management Committee, effectively demonstrating Shanghai Bank's innovative driving force.

Comprehensive financial services witness the growth of enterprises

Over the past decade, Shanghai Bank has always stood by the side of enterprises, committed to providing comprehensive financial support and services for enterprises within the free trade zone, witnessing the robust growth of enterprises in the free trade zone.

The fastest growing unicorn in China's valuation cannot be separated from the dedicated services of the Shanghai Bank Free Trade Zone Branch. S Group is a high-tech enterprise that settled in the Shanghai Free Trade Zone in its early stages of establishment, and is also a typical representative of Shanghai Bank's support for the development of free trade zone enterprises. In the early stages of S Group's entrepreneurship, there was a large investment in research and development, but multiple rounds of financing funds were all overseas. How to make the funds convenient and efficient for entry and use became a difficult problem in fund management at that time. In 2016, the company consulted multiple financial institutions about cross-border fund pooling business. Due to the small scale of the business at that time, the inflow and outflow limits were relatively limited, and a suitable solution was never found. At this time, with solid professional skills, Shanghai Bank, after listening to the demands of enterprises, purposefully recommended the Shanghai Free Trade Zone version of the cross-border RMB two-way fund pool to enterprises, and detailed the convenience and usage precautions of this service.

The meticulous and thoughtful service impressed S Group, and the company quickly decided to establish a two-way fund pool in Shanghai Bank. Shanghai Bank quickly established a special service team and, relying on its own advantages, tailored a cross-border RMB two-way fund pool product for S Group, helping the enterprise smoothly open up channels for cross-border capital flow. Domestic research and development expenses and operational expenses received continuous funding support.

Shanghai Bank's services have not stopped here, but have continued to deepen and upgrade with the development of S Group. For example, with the development of S Group's subsidiaries in various regions, the enterprise needs to coordinate domestic and foreign funds and establish a fund center for unified financial management. Under the advice and guidance of Shanghai Bank, the enterprise has chosen to open a free trade account as the group's fund management account. Through FT accounts, enterprises can freely receive and pay funds and exchange currency on the first line, while the second line flexibly handles the receipt and payment of funds for member companies and groups based on the nature of the funds. At the same time, Bank of Shanghai has provided S Group with an online channel of "Shangyin Zhihui+", allowing enterprises to handle various FT account businesses without leaving their homes, including fund receipts and payments and foreign exchange settlement and sales. When domestic member companies borrow from banks, they can also use the funds from their FT accounts to increase credit, facilitating the enterprise's access to bank credit support.

After years of service, Shanghai Bank and S Group have established close cooperation and interaction in multiple dimensions. Shanghai Bank has also summarized its experience in utilizing the financial advantages of the Shanghai Free Trade Zone to serve science and technology innovation enterprises. It believes that a clear understanding of the needs of science and technology innovation enterprises and cutting-edge research enterprises can help provide them with precise services.

High tech and specialized and innovative enterprises are important forces driving innovation driven development. In recent years, the State Administration of Foreign Exchange has continuously expanded cross-border financing channels for enterprises, supporting high-tech enterprises to better utilize both domestic and international markets and resources. At the same time, under the guidance of the State Administration of Foreign Exchange, optimize internal operational plans and facilitate the signing and registration of external debt contracts for enterprises.

In response to the policy of facilitating high-tech and specialized foreign debt, Shanghai Bank actively promotes and searches for a list of customers that meet policy requirements to understand the needs of corporate foreign debt business. For example, Shanghai Bank learned that Shanghai WG Biotechnology Co., Ltd. requires funding support from overseas affiliated companies. This enterprise is a comprehensive service provider in the field of biological samples, holding the Shanghai High tech Enterprise Certificate, and is subject to the policy of high-tech specialization and foreign debt facilitation. It can independently borrow foreign debt within an equivalent amount of 10 million US dollars. Shanghai Bank immediately explained the policy convenience content in detail to the enterprise and assisted the enterprise in submitting relevant foreign debt signing and registration materials. Finally, it successfully applied for a financing fund of 3 million US dollars, alleviating the tight situation of enterprise funds.

Shanghai Bank also responded promptly to the cancellation of the pilot business of foreign exchange settlement accounts to be paid.

Shanghai WM Co., Ltd. is a foreign-invested enterprise registered in the Lingang New Area, mainly engaged in biopharmaceutical research and development. In daily operations, payment timeliness requirements are relatively high. The pilot policy of canceling the management requirements for capital account settlement accounts in the Lingang New Area can precisely solve the difficulties faced by the enterprise. Shanghai Bank actively introduced the convenience of the pilot policy of capital account foreign exchange management reform in the Lingang New Area to enterprises when handling the registration of domestic direct investment foreign exchange, and carefully explained the requirements for the use of foreign exchange capital and the process of foreign exchange settlement and payment. In June 2022, the enterprise followed the pilot process in Shanghai Bank, and the entire process from foreign exchange capital settlement to RMB fund payment only took 15 minutes. Simple business procedures not only greatly improve the efficiency of investment funds, but also save the work time of enterprise financial personnel and bank staff.

It can be said that a good business environment has laid the foundation for the confidence and determination of enterprises to settle in the Shanghai Free Trade Zone, while innovative policies are only a part of the business environment. In the view of Shanghai Bank, financial service institutions are not only practitioners of policy implementation, but also service providers who take a step forward. Only by continuously deepening service awareness and accelerating exploration and innovation can the policy advantages of Shanghai Free Trade Zone be fully unleashed, and the original intention and mission of providing financial services to the real economy and technological innovation be grounded.