Exclusive | Foreign banks in Shanghai free-trade zone lack permits to transfer funds freely

Ten foreign banks have opened subsidiaries in the Shanghai free-trade zone, but none has obtained a key permit that would allow them to take advantage of the liberalisation offered.

Released from the tight controls on foreign exchange elsewhere on the mainland, firms registered in the zone are supposed to be able to freely convert and transfer capital between overseas accounts and free-trade accounts (FTAs), which the central bank will treat as offshore accounts.

Banks in the zone must apply to the central bank for a permit to allow them to open FTAs for their corporate clients.

"It's funny to see all the banks competing with each other in issuing press releases to say they finally opened [an office] in the free-trade zone, but few of the banks can really tell you what exactly they can do there after they get their branches," said a senior executive at a foreign bank who declined to be named, as he was not authorised to speak to the media.

Another foreign banker involved in the application process, who declined to be named owing to the political sensitivity of the matter, told the South China Morning Post he believed the central bank - the People's Bank of China - might be delaying FTA approval to foreign banks on purpose because Beijing wanted domestic banks to have the first go.