Shanghai urged to relax offshore finance

BOC Aviation, the largest aircraft leasing company in Asia, is lobbying the Shanghai government to relax restrictions on offshore financing in the free-trade zone.

The initiative would facilitate the city in becoming an Asian aircraft finance hub, with the yuan establishing itself as a major settling currency for acquisitions.

The plan, if approved, is expected to attract more aircraft financing companies to the 28 kilometres of land set aside for the zone in Shanghai.

"We have spoken to senior officials in Shanghai about how to stimulate offshore financing for aircraft," said Phang Thim Fatt, deputy managing director and chief financial officer at Singapore-based BOC Aviation. "They will try to accommodate as much flexibility as they can after they clear it with relevant authorities."

Conducting offshore financing on the mainland is now subject to a 7 to 15 per cent withholding tax on the interest, a quota and approval from the People's Bank of China.

The withholding tax on offshore financing was waived by the Singapore government in the 1990s as it wanted to promote the city state as an aviation financial hub.

Meanwhile, overseas investors are looking for yuan investment products, banking on the appreciation in the currency.