Entwicklung von besonderen Vorteilen der Offshore-Finanzierung in Shanghai und Hongkong

1. Offshore financial market
(1) Definition
Offshore financial market is a type of financial derivatives market. Off-Shore Financial Market, also known as “offshore financial center”, is a market where non-residents engage in international financial business. The offshore market targets non-residents, and the funds must come from non-residents in the country where the bank is located and foreign currency funds from other international sources. The offshore financial market is an invisible market. In a broad sense, it only exists in a certain city or region and does not exist in a fixed trading place. It is established through the business exchanges between the local financial institutions and the international financial market. exist.
(2) Formation conditions
Generally speaking, for a city or region to form an offshore financial market, the following conditions must be met:
1. Relax financial and foreign exchange controls, allow free outflow and inflow of cross-border capital, reduce restrictions on interest rates and financial transactions; exempt foreign currency deposit reserve requirements;
2. Have a generous tax policy and provide preferential measures such as tax relief, such as requesting relief or full exemption from interest withholding tax, income tax, local tax and stamp duty;
3. To maintain the stability of the political situation and economy of the country or region where it is located, policy changes and legal revisions must be transparent, with a background of steady economic growth. There should be a sound financial legal system to protect the market secrets of both parties to financial transactions;
4. Have complete financial infrastructure, experienced and efficient financial institutions, a large number of financial professionals and advanced international communication equipment, to provide efficient financial services for non-residents;
5. Possess favorable economic and natural geographical location, connect the global international financial market network, and the relative concentration of multinational companies and multinational financial institutions in the city or region where they are located.
(3) Influence
1. Positive aspects
From a positive perspective, in the post-war world financial development, the offshore financial market has played an important role, not only reducing the cost of international capital flows, strengthening competition in the international capital market, and facilitating the business activities of multinational companies, but also With interest rate liberalization, zero reserve ratio, etc., the face of the financial management system of many countries has been reshaped.
2. Negative aspects
On the negative side, not to mention those tax havens with the color of “money laundering”, the capital flow only through the offshore financial market has impacted the stability of national and even global financial markets time and time again. With the further development of financial liberalization, capital account liberalization, interest rate liberalization, zero reserve ratio and other “selling points” of the offshore financial market to attract capital inflows in the past are becoming the characteristics of more and more countries’ financial systems. . The impact of the offshore financial market separated from inside and outside on the national economy has weakened. Therefore, the criticism of the offshore financial market has increasingly focused on the tax haven-type offshore financial center.
First, it gives international hot money the opportunity to evade regulation and manipulate capital flows. Modern institutional investors are often heavily regulated. Take a mutual fund in the US as an example, it must be registered with the US Securities and Exchange Commission, and almost all aspects of its organizational structure and operations are subject to strict supervision, including the types and proportions of investable securities. In contrast, hedge funds are mostly registered in offshore financial centers, are not subject to the aforementioned regulatory requirements, and can pursue extremely aggressive or even manipulative investment strategies without the knowledge of most market participants. It played a major role in the major financial crises in the 1990s.
Second, it creates opportunities for tax evasion, capital flight and money laundering crimes. Capital flight is a worldwide problem, especially in developing countries and countries with economies in transition. Nine of the 15 heavily indebted developing countries today experienced large-scale capital flight. Since the 1990s, the problem of capital flight from China and the transition economies of the former Soviet Union and Eastern Europe has also been so prominent that the statement has emerged: “The only capital formation in Russia takes place in Cyprus’ bank accounts.” These flight capitals , a considerable part of it flows into offshore financial centers. During his tenure, former Ukrainian Prime Minister Lazarenko used his power to buy oil from Russia at a low price, and then sold it at a high price in the Ukrainian market for profit. A considerable part of the illegal proceeds flowed to the offshore financial center. In August 1999, Swiss investigators found private accounts set up by Lazarenko at a Geneva bank in 1996. Funds flowing through these accounts totaled $72 million that year, of which about $44 million went to banks in the Caribbean. . Russian giant enterprise groups such as Yukos, Tyumen Oil, Siberia Oil Company, etc. that have emerged in the wave of privatization, their legal registration places are not in Russia, but in Cyprus, Gibraltar, British Virgin Islands and other tax havens for offshore finance center. In these places where Moscow is less powerful, those who are busy turning public into private can launder money legally, and those who have already turned public into private can avoid tax substantially.
The role of offshore financial centres in facilitating tax evasion, capital flight and money laundering has aroused strong international resentment. On June 21, 2000, the Financial Action Task Force, an international anti-money laundering organization, announced the list of countries and territories that were not cooperating with money laundering activities. The Bahamas, the Cayman Islands, the Cook Islands, the Dominica, Offshore financial centers such as Liechtenstein, Marshall Islands, Nauru, Niue, Panama, St. Kitts and Nevis, and St. Vincent are among them.
3. Regulatory issues
With the increasingly significant impact of offshore financial centers on international economic life, the international community has been unable to tolerate the complete separation of offshore financial centers from supervision. The international supervision of offshore financial centers tends to strengthen, and the goal of supervision is to improve their information disclosure. , to improve transparency.
(1) Global regulatory coordination of international economic organizations
At present, the most important global financial regulatory coordination bodies are the Bank for International Settlements, the International Monetary Fund, the International Organization of Securities Commissions, and the Financial Stability Forum established by the “G7″ in February 1999. After the establishment of the forum, it has successively absorbed representatives from the financial regulatory authorities of Australia, Hong Kong SAR, the Netherlands, and Singapore, as well as experts from international financial organizations, international regulatory agencies and central banks to form a committee, thus greatly enhancing its influence. Although the guidelines issued by these institutions are not mandatory and member states can choose to implement them, in order to demonstrate their financial soundness, member states often compete to implement these guidelines, or even enforce stricter regulations.
In April 1999, the Financial Stability Forum established the Working Group on Offshore Financial Centers. In a report released in March 2000, the working group recommended that offshore financial centres implement internationally recognized standards, particularly those on regulation, disclosure and information sharing, and recommended that the International Monetary Fund collaborate with the World Bank, other standard-setting Institutions collaborate on the basis of a formal process to assess the extent to which offshore financial centres adhere to international standards. Due to the different degrees of compliance of various offshore financial centers with international standards – Hong Kong, Singapore and other offshore financial centers have a fairly complete regulatory system, while offshore financial centers in the Caribbean and Pacific islands have almost no regulatory measures” Tax haven”, in order to encourage offshore centers to follow international standards, the Offshore Financial Center Working Group classifies each offshore financial center according to the quality of financial supervision and the degree of international cooperation, and implements differential treatment. Among them, the Cayman Islands, Samoa, and the British Virgin Islands belong to the “non-cooperators”.
(2) Pressure from the EU and its member states
The EU’s efforts to require stronger regulation of offshore financial centres revolve around the introduction of a new “savings tax law”, which came into effect on January 1 this year. Due to the higher tax rates in Western European countries, EC/EU countries have always had large amounts of resident assets deposited in Switzerland, Luxembourg and offshore financial centres in the Caribbean and Pacific Islands, thus eroding the EC/EU countries’ tax base. Italy, which has a developed “underground economy”, and Germany, which has high taxes and high welfare, are particularly eroded. In January 2002, the European Union passed a new “Savings Tax Law”, which aims to eliminate the banking secrecy system and ensure that European governments can obtain corresponding taxes from their citizens’ deposit interest and investment income. In February 2003, the EU adopted a draft to stop capital outflows, stipulating that from 2004, EU member states except Luxembourg, Belgium and Austria must adopt a bank information exchange mechanism, so that the government of the depositor’s country of residence can know that its residents are overseas. interest income on deposits and is taxed. Switzerland is reluctant to give up bank secrecy, but has reached an agreement under pressure from the European Union to levy a special tax on the bank accounts of EU citizens.
The EU’s efforts to introduce a new “savings tax law” have hit offshore financial businesses in European tax havens hard, prompting capital flows to tax-haven offshore financial centres outside Europe. As a result, the EU and its member states have put pressure on offshore financial centres outside Europe to comply with the new Savings Tax Act. Since many of the offshore financial centers in the Caribbean are territories of European countries, they have become the focus of pressure from the EU and its member states.
Under international pressure, offshore financial centers have more or less strengthened the supervision of offshore companies, especially financial institutions.
(3) China’s policy choices
The increase in the scale of cross-border capital flows between my country’s mainland and offshore financial centers also has positive and negative significance. Therefore, policies related to capital flows in offshore financial centers should also be addressed from two aspects. On the one hand, we should be fully aware of the chaos caused by the disorderly capital flow of offshore financial centers to my country’s economic life, and we should strengthen its monitoring and supervision; Although some of the motives for the registration of the center are for tax evasion, financial fraud and even embezzlement of public assets, there are also some motives for meeting the needs of cross-border operation of funds in cross-border allocation, or to obtain equal treatment with foreign businessmen. Governments should strive to satisfy these legitimate needs, thereby reducing their intrinsic motivation to go to offshore financial centers. The desire of companies to isolate risks and improve asset liquidity through offshore companies is understandable and acceptable, but the motives for tax evasion and asset misappropriation need to be guarded against. The specific policy measures to choose from are as follows:
Improve the supervision of capital flow So far, my country’s capital account supervision is still asymmetric and incomplete supervision: the supervision of capital outflow is stricter than the supervision of capital inflow, and the supervision of domestic institutions is stricter than that of foreign institutions. . In view of this, capital inflow and capital outflow, foreign-funded enterprises and domestic-funded enterprises should be integrated into the monitoring scope. One of the most important points is that the Mainland’s foreign trade and securities regulatory authorities should incorporate offshore companies that are essentially domestic enterprises into the scope of supervision through appropriate means, especially for companies that are also listed overseas, in order to avoid a regulatory vacuum. The implementation of the foreign direct investment statistical system in 2003 is an important development in this regard. Only on the basis of clarifying the real scale, composition and source of capital flows between China and offshore financial centers, can appropriate policies be proposed. This is the focus of the work and the difficulty of the work.
Strengthening the supervision of offshore financial centers is inseparable from international cooperation. Our country currently lacks sufficient strength to require offshore financial centers to improve the transparency of their capital flows for our country, but we have the ability to benefit from it by advancing the supervision of international organizations. We must pay full attention to the special role of Hong Kong.
Appropriately restrict relevant institutions from conducting offshore financial services in the Mainland At present, there are already companies that have set up agency registration of offshore companies in Mainland China, such as Panamanian Morgan & Morgan Law Firm, Offshore Business Consulting Co., Ltd., Hongji International Business, etc. , and its main business includes “registering an offshore company or providing offshore financial services” and other businesses. According to the principle that “no express prohibition is a license”, it is not appropriate for the government to explicitly prohibit them from opening such businesses. Doing so may make them and companies intending to register offshore companies move into the underground market, making it more difficult to supervise. However, the government should restrict the business promotion of these companies, such as restrictions on their advertising. In fact, the United States also restricts advertisements promoting offshore financial services in newspapers published in the United States.
Rectify the transfer and restructuring of state-owned assets At present, the most serious challenge to my country from offshore financial centers is that it may encourage corrupt behavior in the process of restructuring and transferring state-owned assets. To this end, the government should vigorously rectify the transfer and restructuring of state-owned assets.
Strengthen the financial supervision of offshore companies’ investment enterprises to prevent them from transferring financial risks from abroad. First, the banking association should promote the improvement of information exchanges between banks, including local and remote information exchanges, in order to grasp the overall assets of offshore companies’ investment enterprises. debt status. Especially for enterprises investing in multiple offshore companies belonging to the same group, efforts should be made to grasp the overall asset-liability structure of the group. Second, improve information exchange with offshore financial centers in various ways, and maximize the transparency of offshore company operations.
Relaxing capital flow controls to facilitate cross-border operations of enterprises. One of the reasons why some companies are keen to register offshore companies is to avoid some excessive control measures in the current foreign exchange management system, gain greater initiative in the use of funds, and meet the needs of The company needs to carry out multinational operations. In view of the fact that there is no foreign exchange gap in my country at present, it is time to moderately relax foreign exchange control of enterprises’ overseas investment and meet the above-mentioned legitimate needs of enterprises. The government’s reform in this regard should continue.
Eliminate excessive preferential treatment for foreign investment and realize equal treatment of domestic and foreign investors One of the motivations for enterprises to register offshore companies is to enjoy “super-national treatment” for foreign investors. At present, the opposition to the “super-national treatment” of foreign capital is becoming stronger and stronger. The time is ripe for the reduction in taxation, approval, land, and borrowing of foreign debts to the complete abolition of the “super-national treatment” for foreign investment. (World Knowledge)
2. The overall situation of international offshore finance
(1) Development history
The modern offshore financial market has roughly developed over the past 50 years.
On October 1, 1968, the Bank of America in Singapore was first approved to set up an Asian currency unit; by 1970, Singapore approved 16 banks including Citibank to operate overseas currency business, and the Asian offshore financial market began to form. Since then, offshore financial markets have been established in Hong Kong, Manila, Tokyo, Labuan (Malaysia), and Bangkok.
In the late 1960s, the Federal Reserve allowed Bank of America to establish “shell branches” with only one mailbox in the Bahamas and the Cayman Islands in the Caribbean region, and thereby participate in the Eurodollar market, and the offshore financial market in the Caribbean region began to take shape. .
Although the offshore financial market was originally created to evade supervision, since the 1980s, when financial liberalization has become a global trend, many governments have begun to consciously set up offshore financial markets in their countries, trying to Reap the benefits of increased financial services revenue, capital inflows, and increased employment in the country’s financial services sector. Not only in developing countries such as Malaysia, Thailand, and South Korea, but even the United States set up “international banking facilities” in New York, Detroit and other places in 1981 to engage in offshore financial business, trying to attract American banks engaged in offshore financial business. go back home.
(2) Three major offshore financial markets in the world
1. Hong Kong
In the process of the country’s rapid economic development, as an international financial center, Hong Kong, has been playing a key role in global economic activity. Hong Kong’s business environment is superior, capital and information flow, the market is open, free and orderly, and it gathers professionals from all over the world, with a sound infrastructure, an independent legal system, and low tax rates. “The ideal platform. Hong Kong’s tax system is simple and low, and it is known as a paradise for small and medium-sized enterprises and a fertile ground for entrepreneurship. Hong Kong adopts the territorial source principle for taxation, that is, only profits originating in Hong Kong are taxable in Hong Kong, while profits originating elsewhere are not subject to profits tax in Hong Kong. In short, even if a limited company is established in Hong Kong, if the company’s business profits do not come from Hong Kong, the company can apply to the Hong Kong Inland Revenue Department for “offshore income” to be exempt from Hong Kong profits tax when reporting Hong Kong profits tax.
2. British Virgin Islands (BVI)
(1) Overview of the British Virgin Islands
The British Virgin Islands (BVI) is located between the Atlantic Ocean and the Caribbean Sea and its official language is English. The executive power of the BVI comes from the Queen of England, and the power is delegated to the local governor. The laws of the island follow the English common law. The BVI is dominated by financial services and tourism, which accounts for 45% of national revenue, while nearly 50% of government revenue comes from licensing fees for offshore companies.
A company registered in the BVI does not need to pay tax to the BVI government on the profits earned around the world. There are no foreign exchange controls in BVI, and any currency can enter and exit freely. As of 2014, there were more than 1 million companies registered locally. The standard currency of the BVI is the US dollar. Case: China Mobile, China Unicom, NetEase, Youku, TCL International, China Resources Land, Everbright International, Mengniu Dairy and other high-quality companies have chosen to register in BVI. (2) Relations between BVI and China
BVI has not signed a double taxation agreement with China or Hong Kong. However, as early as 2009, China signed the Agreement and Protocol on Tax Information Exchange between the Government of the People’s Republic of China and the Government of the British Virgin Islands with the BVI, which took effect on December 30, 2010. The original indigenous inhabitants are Indians, and the existing residents are mostly Afro-Caribbeans. It is a British territory and is called a Caribbean tax haven. It ranks fourth in the world for foreign investment. The government of the first choice for foreign investment promulgated the International Business It has become the most popular offshore financial center in the world.
3. Cayman Islands
(1) Overview of the Cayman Islands
The Cayman Islands is a British possession in the Western Caribbean Islands, consisting of the three islands of Grand Cayman, Little Cayman and Cayman Brac. The laws of the island follow the English common law. Finance and tourism are the two mainstays of Cayman’s economy. Cayman is one of the four major offshore financial centers in the world, the world’s largest offshore banking center, the world’s second largest offshore exclusive insurance base, a famous offshore financial center and a “tax haven”. The currency of the Cayman Islands is the Cayman Islands dollar.
There are no foreign exchange controls in Cayman, and any currency can be moved in and out freely. The world’s 25 largest banks have subsidiaries or branches in Cayman. The total assets of the financial and trust industries on the island have exceeded US$250 billion, accounting for 7% of the total Eurodollar transactions. An average of about 4,300 companies are incorporated here every year. More than 700 global banks have branches in the Cayman Islands. Baidu, Alibaba, Focus Media, Renren, Qihoo 360 and other high-quality companies in China, and world-renowned companies such as Coca-Cola, Procter & Gamble, Apple, Intel in the United States have chosen to register in the Cayman Islands.
(2) Relations between Cayman and China
Cayman has no double taxation agreement with any country. The Cayman Islands has signed tax information exchange agreements with more than 20 countries including China and the United States. We believe that Cayman is more confidential and requires less disclosure than BVI and Bermuda. Today’s world economy is becoming more and more integrated, and business is increasingly showing a trend of cross-border development. Enterprises often use cross-border operations to enhance their strength and expand their business areas. The registration and establishment of overseas offshore companies is a way for enterprises to go global and carry out cross-border business. , a shortcut to enhance the company’s international image.
3. my country’s offshore financial situation
(1) The development history of my country’s offshore financial market
Since 1989, China’s financial regulatory authorities have successively approved China Merchants Bank, Industrial and Commercial Bank of China Shenzhen Branch, Agricultural Bank of China Shenzhen Branch, Shenzhen Development Bank, Guangdong Development Bank, etc. to conduct offshore financial services on a trial basis in China.
(2) Hong Kong offshore financial market
1 Overview
The historical background of Hong Kong’s evolution into an international financial market can be traced back to before World War II. In the context of financial globalization, Hong Kong developed from a British colonial “free port” to an important offshore financial center in Asia and the world today. . The development of Hong Kong’s offshore financial market can be reflected by the increase in the number of foreign banks. Before the 1970s, due to strict government restrictions, the development of foreign banks in Hong Kong was slow. By 1975, there were only 28 foreign banks in Hong Kong. By 1980, the number had risen to 88. By 2007, there were 138 licensed banks in Hong Kong, of which 115 were registered outside Hong Kong. The rapid development of foreign banking institutions in Hong Kong’s financial market has driven the continuous expansion of the scale of Hong Kong’s offshore financial market, and the amount of Hong Kong’s offshore currency deposits has also increased year by year. At present, Hong Kong has become a market for lending funds to a wide range of the world, and is the center of Asian syndicated loans.
The offshore financial market in Hong Kong is a typical hybrid of domestic and foreign. The internal and external hybrid offshore financial market means that the offshore business and the domestic business are not separated, and the purpose is to play the complementary and promoting role of the funds and business of the two markets. The inflows and outflows of such market funds are not strictly controlled, and they can flow into the country or outflow from the country to the outside world. No interest tax is levied on the interest of the capital inflows from abroad, and the foreign exchange fund does not implement the deposit reserve system, and non-residents are allowed to operate. Onshore business and domestic business.
2. Risks
As an important component of the international financial market, the Hong Kong offshore financial market faces the following risks:
(1) Credit risk. The most important form of risk in the offshore financial market is credit risk, which refers to the financial risk that the counterparty defaults or fails to perform the contractual obligations, thereby causing economic losses to the offshore bank. The traditional credit risk mainly comes from the loss caused by the default of the counterparty, which is mainly concentrated in the loan business of offshore banks. However, with the advancement of modern risk management technology and changes in the risk environment, the content of credit risk in the modern sense also occurs. changes, resulting in an overlap with market risk, that is, the risk of loss due to a decline in asset prices in the portfolio due to changes in counterparty performance and credit levels. In addition, the business capacity, capital scale, moral level, and continuity of operations of the counterparty will all affect the magnitude of credit risk.
(2) Market risk and operational risk. Market risk and operational risk are often combined. When commercial banks raise funds from the offshore financial market in order to issue loans to domestic enterprises, the amount of foreign debt of the host country will expand, and the final result of the expansion of the scale of foreign debt will be that the scale of domestic and foreign debt will be out of control. When the large-scale foreign debt matures When the foreign currency is continuously converted into the domestic currency, the pressure of domestic currency expansion will follow, which will inevitably affect the operation of China’s monetary policy and even lead to the local currency. Devaluation and severe inflation; the exchange rate risk of commercial banks will continue to increase in the process of borrowing a lot of foreign debt, and once bad debts and bad debts appear in the loan process, it will lead to problems in the anti-risk capability of the entire banking system; in addition, Domestic credit will expand rapidly with the large inflow of foreign capital. As a result, domestic supply will exceed demand, which will lead to a huge deficit in the balance of payments. At this time, once the flow of funds is cut off, the entire financial system will have a crisis of collapse, and even the economy will rapidly collapse. shrinking, the so-called “over-borrowing syndrome”, as evidenced by the 1997 Thailand financial crisis.
(3) Liquidity risk. The offshore business of the offshore financial market is mainly based on deposits and loans. One of its great features is that “two ends are outside”, which makes it difficult to understand the debt structure, business situation and background of loan customers. Invisibly, the cashing ability of offshore banks is greatly reduced, that is, there is a greater liquidity risk. In addition, in some offshore financial markets, the offshore and onshore market business are not separated, which may lead to deviations in the decision-making of offshore credit business. If there is no more scientific offshore credit risk management and supervision mechanism, It will inevitably lead to a greatly reduced ability to prevent and take risks.
(4) Legal risks. The current offshore financial market is still in constant development and exploration, and the relevant institutional regulations and legal provisions are not yet perfect, which brings opportunities for some unscrupulous businessmen and corrupt elements, and their speculative activities will greatly increase risk in onshore financial markets. First, it provides a way for lawbreakers to embezzle state property and further lead to large-scale capital flight. This is because the offshore financial market has very convenient professional channels for assets, which greatly facilitates the illegal actions of criminals. Second, companies can take advantage of the convenience of offshore financial markets to commit fraud. This is mainly due to the fact that enterprises can take advantage of the opaque information of the offshore market to inflate assets; in addition, due to the tax-free treatment of the offshore market, enterprises can inflate their business performance without causing an increase in tax costs. To achieve the purpose of listing “money”. Thirdly, enterprises can transfer financial risks by keeping the book debt level of subsidiaries with high information disclosure obligations under their control at a low level, while the overall high debt of the enterprise is not disclosed to the public. Finally, the offshore financial market has become a money laundering haven for some people because of its loose financial rules, liberal corporate laws and strict corporate secrecy laws. They use the various secrecy services here to launder money and conceal or disguise their criminal proceeds. .
(5) Interest rate risk and exchange rate risk. Through the offshore financial market, a country’s currency may be accumulated abroad, and once the accumulated currency is used by speculators, they can affect the exchange rate and interest rate of the country’s currency through manipulation in the foreign exchange market. When the interest rates of onshore funds and offshore funds in the market are quite different and cannot be effectively penetrated, large-scale arbitrage transfer of funds will occur. If the offshore interest rate is high and the onshore interest rate is low, domestic funds will flow out; and if the offshore interest rate is low and the onshore interest rate is high, a large amount of offshore funds will flow into the country. For markets where offshore accounts and onshore accounts are not strictly separated, limited foreign exchange resources may escape through offshore accounts, which will have a great impact on the foreign exchange management of one’s own country. Similarly, if the market price of a country’s foreign exchange price is different from the control price, it will also cause arbitrage between onshore foreign exchange funds and offshore foreign exchange funds, which will bring many uncontrollable factors to the country’s foreign exchange management.
3. Risk control
(1) Implement a strict market access system. In view of the fact that the offshore financial market is prone to credit risks, it is very necessary to establish a system for the establishment and approval of offshore financial institutions, and there must be a complete set of approval procedures for institutions that want to open offshore business. Depending on the applicant’s requirements, credit status and capital strength, licenses with different powers are issued, and corresponding regulations are made for their business scope, and there are differences for offshore banks that hold different types of licenses. All offshore banks must be established in the form of branches to ensure that each offshore bank has its own head office as its last repayer, so as to avoid the failure of offshore branches to the greatest extent. shock. For foreign banks that attempt to enter, we shall focus on considering whether the capital, reputation, risk control, etc. of their head offices meet their requirements as the last debtor.
(2) Strictly supervise offshore business. According to relevant international regulations, various risks of offshore banks shall be managed, with particular emphasis on capital adequacy ratio requirements and liquidity requirements. After 2007, the supervision of offshore bank risk is mainly carried out according to the requirements of Basel New Capital Accord. It should be pointed out that the solvency supervision responsibility of foreign-funded offshore branches and the solvency supervision responsibility of joint venture offshore financial institutions belong to different supervisory authorities. At the same time, it is necessary to continuously improve the internal risk control system of offshore banks, and on this basis, through on-the-spot investigations, conduct quantitative indicators assessment of risk asset management and asset-liability management of offshore banks.
(3) Strictly withdraw from supervision. Exit regulation is a post-event remedy regulation when a risk occurs, and measures are taken to avoid further escalation of the situation. Mainly include: First, the crisis early warning mechanism. It refers to a system in which the relevant supervisory authorities pay special attention to possible crises to prevent their further expansion before a crisis occurs. Second, the deposit insurance system. It refers to paying insurance premiums to specific institutions according to a certain proportion, which can be used to make up for certain losses when risks occur, so as to ensure the safe operation of relevant institutions. Third, the lender of last resort system. When financial difficulties arise, financial institutions in the offshore financial market can borrow a certain amount of funds from financial regulators to tide over the difficulties and avoid bankruptcy. The current situation shows that in many countries where offshore financial markets are located, the relevant exit supervision is a mere formality and is not as strict as the access supervision. In particular, many offshore markets do not adopt deposit insurance funds in order to enhance their competitiveness. This system can indeed promote the development of related offshore businesses, but at the same time, it also greatly increases the risk of the market.
(4) Strengthen international cooperation in the supervision of offshore financial institutions. The offshore financial market emerged in the context of financial globalization. To this end, strengthen international cooperation in the supervision of offshore financial institutions, realize the sharing of regulatory information between the country where the offshore financial institution is located and the home country, and learn from other countries’ opinions on the offshore financial industry. Advanced experience in supervision is very necessary. Only in this way can we continuously improve the supervision level of our own offshore financial industry, so that offshore financial risks can be prevented or resolved in a timely manner.
(3) Shanghai Free Trade Zone Offshore Financial Center
1. Construction significance
The Shanghai Pilot Free Trade Zone was officially approved by the State Council in August 2013, and was officially established in September of the same year. From the perspective of functional positioning, the Shanghai Free Trade Zone will become the largest free port in the Asia-Pacific region, and will also be built into an international financial center integrating the functions of an international trade settlement center, financial leasing, and futures bonded delivery. Considering the important role of offshore finance in the construction of an international financial center and the role of the offshore financial market in promoting the development of China’s financial industry, the construction of an offshore financial center in the Shanghai Free Trade Zone will not only contribute to the construction of the Shanghai Free Trade Zone and an international financial center. , and has far-reaching significance for my country’s future reform and development.
First, the establishment of the Shanghai Free Trade Zone has raised more demand for offshore financial services. The establishment of the Shanghai Free Trade Zone enables domestic enterprises to go abroad, Joining the international competition provides convenient conditions, and these companies that go out are in urgent need of offshore financial services. These enterprises can be roughly divided into four categories: enterprises in the free trade zone, export-oriented small and medium-sized enterprises, “going out” enterprises and shipping enterprises. For enterprises in the Free Trade Zone, there are a large number of frequent cross-border receipts and payments in their daily operations. Taking the former Shanghai Comprehensive Bonded Zone as an example, in 2010, the accumulated import and export trade volume of the Shanghai Comprehensive Bonded Zone reached 80.6 billion US dollars. A year-on-year increase of 42%. Due to the limited offshore financial services provided by domestic financial institutions, most FTZ companies often register offshore companies and place their capital operation centers in banks in Hong Kong, Singapore and other places. For export-oriented small and medium-sized enterprises and “going out” enterprises, since these enterprises do not have long-term corporate relationships with overseas banks and have corresponding credit ratings, they face difficulties in overseas financing, so they also have difficulties in providing offshore financial services to domestic banks. big demand.
Second, the construction of the Shanghai Free Trade Zone requires offshore finance to act as a risk firewall mechanism. The Shanghai Free Trade Zone will provide enterprises with a window to connect with overseas capital and markets in an all-round way. In the future, corporate legal persons can complete the free conversion of RMB in the Free Trade Zone, which means that the RMB capital project will be more open to enterprises in the Free Trade Zone. . In this case, there is no corresponding isolation mechanism, and this move will expand the scale of cross-border flow of RMB, and eventually the domestic macroeconomic and financial sectors will be impacted by cross-border capital flows. Therefore, the establishment of a free trade zone objectively requires the construction of an offshore financial center to limit cross-border capital flows within the zone, thereby preventing the impact of international capital flows. At the same time, in the offshore financial center, the offshore RMB business can form different interest rates and exchange rates from outside the area, and a more market-oriented interest rate and exchange rate level can also avoid the arbitrage of international hot money. In addition, the establishment of an offshore financial center can also prevent the financial risk contagion brought about by financial business innovation in the free trade zone, and play the role of a risk firewall.
Thirdly, the establishment of Shanghai’s offshore financial center is a prerequisite for the construction of Shanghai’s international financial center. Throughout the world, important international financial centers and regional financial centers, such as New York, Tokyo, London, Singapore and Hong Kong, have formed a certain scale of offshore financial markets. Therefore, for Shanghai, which is seeking to build an international financial center, creating and developing an offshore financial market is an indispensable part of building an international financial center in Shanghai. In addition, under the circumstance that the RMB cannot be fully convertible in the short term, Shanghai will encounter some obstacles in becoming an international financial center; in this case, since the main transaction objects in the offshore financial market are non-residents, the current foreign exchange can be avoided. Therefore, the construction of an offshore financial center can speed up the construction of Shanghai as an international financial center under the existing conditions. Not only that, the establishment of the offshore financial market will also mean that the internationalization of Shanghai’s financial market has taken an important step, so that Shanghai’s financial market system will be more complete and gradually integrated with international standards.
Finally, the establishment of Shanghai’s offshore financial center will help to form a pushback mechanism for reform. The benefits of an offshore financial center in the Shanghai Free Trade Zone are not limited to the local area. It can also promote the reform of the domestic economic and financial sector through demonstration effects. At present, my country’s economic and financial system reform has entered a critical stage. The construction of Shanghai’s offshore financial center will not only take the lead in exploring the internationalization of RMB in the region, but also accelerate the establishment of a market-oriented formation mechanism for interest rates and exchange rates through capital arbitrage and other methods, and set a reference for market-oriented interest rates and exchange rate levels. value. In this sense, the establishment of offshore financial centers can not only absorb low-cost overseas funds and promote domestic economic development, but also achieve the purpose of “promoting reform through opening up”.
2. Construction mode
(1) Model selection of offshore financial centers in free trade zones
Summarizing the construction of offshore financial centers in various countries, there are three types of “offshore financial centers”, namely internal and external hybrid, internal and external separation, and penetration. The hybrid type of internal and external is the highest state of the development of “offshore financial center”, that is, the offshore financial business is not separated from the domestic financial business, and the capital flow is highly liberalized, which is typically London and Hong Kong; An artificially created international financial platform for non-resident transactions, typically New York, Singapore, Tokyo, etc.; the penetration type is a further development on the basis of separation, with offshore accounts and onshore accounts separated, and resident transactions and non-resident transactions are basically separated , but allows a certain degree of penetration between the two accounts, typically Bangkok in Thailand and Labuan in Malaysia. Below, we will compare the three models of the FTZ to analyze which model should be adopted in the Shanghai FTZ.
In essence, in a hybrid offshore financial center, domestic and foreign businesses are integrated, and both residents and non-residents can engage in deposit business in various currencies. Due to the lack of an isolation mechanism in hybrid offshore financial centers, under the influence of international capital flows, external economic policy shocks, inflation and other factors will have a greater impact on the domestic economy and financial market. The financial management authority of a country with a separation of inside and outside the country strictly separates the offshore financial business and the onshore business. The bank has two sets of accounts for the onshore business and the offshore business, and the accounts cannot be confused. In this model, the financial authority Onshore business and offshore business are managed separately, thus maintaining the stability of the domestic financial market. In contrast, permeable offshore financial centers can better utilize foreign capital, and can better control the flow of funds between domestic and foreign markets and between onshore and offshore accounts than hybrid models, so they have less impact on the domestic economy. financial shock.
Judging from the international experience in the construction of offshore financial centers, the major offshore centers in the world (such as New York and Tokyo) were initially built into offshore centers with internal and external separation, and then gradually with the expansion of business scale and product innovation. It can be seen that the offshore financial center integrating internal and external is built on the basis of a relatively complete domestic financial system, a highly developed financial operating mechanism, and a high degree of financial liberalization, while my country does not have the ability to establish The economic environment of an offshore financial market that integrates both inside and outside.
Considering that my country’s current economic system is not perfect, and considering that the principle of “opening the first line and controlling the second line” based on the Shanghai Free Trade Zone has separated the Free Trade Zone from the mainland, the construction of an offshore financial center in the Shanghai Free Trade Zone should be the first choice. Internal and external separation type, which separates offshore financial business and onshore business. After the market-oriented reform of domestic interest rate and exchange rate is basically completed, the offshore center can be transformed into a permeable offshore financial center.
(2) Functional Orientation of Offshore Financial Centers in Free Trade Zones
At present, in the wave of RMB internationalization, Hong Kong has become the largest offshore RMB financial center. Meanwhile, the offshore RMB financial business in Singapore, London and New York has also developed rapidly. Therefore, the construction of an offshore financial center in the Shanghai Free Trade Zone in the future needs to have a clear functional orientation.
Different from Hong Kong, Singapore, London and other places, Shanghai’s offshore financial center is a local offshore financial center aiming to serve the free trade zone. The establishment of the Shanghai Free Trade Zone has provided great convenience for enterprises to go global. In the future, as more enterprises take advantage of the Shanghai Free Trade Zone to join the international competition, these enterprises urgently need offshore financial services. In this sense, the offshore financial center of the Shanghai Free Trade Zone should be based on the service free trade zone, aiming to provide offshore financial services for the enterprises going out of the zone.
In addition, the offshore financial center of the Shanghai Free Trade Zone should also focus on radiating the Yangtze River Delta Economic Zone. If we compare the economic hinterland of Shanghai and Hong Kong, Shanghai is backed by the Yangtze River Delta region, which has continued to develop economically, while Hong Kong relies on the development of the Pearl River Delta. In contrast, the GDP of the Yangtze River Delta has been higher than that of the Pearl River Delta region for a long time, and since 2008, the growth rate has also been higher than that of the Pearl River Delta region. Therefore, Shanghai has the strongest economic strength in the hinterland. In this sense, the construction of an offshore financial center in the Shanghai Free Trade Zone is full of potential.
To sum up, from the perspective of functional orientation, the construction of an offshore financial center in the Shanghai Free Trade Zone should rely on a strong domestic economic foundation, focus on product development, and make breakthroughs in RMB derivatives trading and financial futures. It serves as a functional offshore financial center separated from inside and outside the Shanghai Free Trade Zone, and attracts international capital through the development of offshore financial business, thereby creating an international financial center that attracts foreign enterprises and FDI inflows and radiates to the Yangtze River Delta Economic Zone.
3. Institutional arrangements
(1) Set up offshore financial accounts in the free trade zone under the principle of “opening the first line and controlling the second line”
The establishment of an offshore financial account in the FTZ is a prerequisite for building the Shanghai FTZ into an offshore financial center. For now, non-resident financial accounts of domestic financial institutions in my country are divided into offshore bank accounts (OSA) and non-resident accounts (NRA). Among them, offshore bank accounts integrate deposit taking, financing and cash management services. In terms of supervision, reference is made to overseas banks and overseas branches of domestic banks; non-resident accounts are settlement accounts to facilitate the receipt and payment of funds of overseas enterprises. Therefore, in terms of supervision, only the opening bank is required to review and record the use of funds. However, the business scope of both offshore bank accounts and non-resident accounts is too narrow to meet the offshore business needs of enterprises, which leads to enterprises often detouring to Hong Kong and Singapore to seek offshore financial services. First, for offshore bank accounts (OSA), only a few banks such as Shanghai Pudong Development Bank, Bank of Communications, and China Merchants Bank have set up offshore bank accounts, and other banks can only operate offshore business in overseas sub-branches; and offshore bank accounts are only allowed to absorb foreign currency deposits. They also issued foreign currency loans and were not allowed to operate renminbi business, which severely restricted the development of offshore bank accounts. Secondly, the non-resident account (NRA) is essentially an account used for cross-border trade. Its account deposits can only pay current interest rates and cannot be used for overseas loans. Although these funds can be used for domestic loans, they occupy short-term foreign debts of banks. indicators, therefore, the enthusiasm of banks to develop offshore business is very limited.
The establishment of offshore financial accounts in FTZs should be based on the principle of “opening the first line and controlling the second line”, and complementing the existing offshore financial accounts. Offshore accounts in FTZs can be based on existing offshore bank accounts (OSA) and refer to the financial business in offshore markets such as Hong Kong, and approve more qualified banks to participate in the operation, so as to meet the offshore business needs of enterprises to the greatest extent. At the same time, realize the basic isolation of offshore business and onshore business. Specifically, the free trade zone accounts can be managed in a “list” format, focusing on opening to enterprises and non-residents in the free trade zone. For the transactions of enterprises and non-residents in the zone under the current account, their onshore accounts and free trade accounts can be opened. Penetration restrictions between accounts in trade zones; at the same time, in order to avoid the impact of the establishment of accounts in free trade zones on the domestic financial market and the RMB exchange rate, transactions under the capital account should adopt a quota approval system, allowing domestic offshore RMB business to have a limited quota Investing in the domestic market, especially for non-residents with no real trading background, can conduct RMB business for them at the offshore exchange rate of Hong Kong; not only that, the regulatory indicators such as deposit reserve should be retained, and the reserve and loan-to-deposit ratio should be activated when necessary. Control the expansion of the scale of offshore assets and prevent potential risks caused by its rapid expansion.
(2) Expand offshore RMB business and build a free trade zone offshore capital market system
The establishment of an offshore financial center in the Shanghai Free Trade Zone can attract international funds through trade, investment and other channels. Therefore, in the future, we should take the opportunity of the construction of an offshore center in the Free Trade Zone to expand the scope of RMB offshore financial services to meet the needs of the Free Trade Zone. The financing needs faced by the development of domestic enterprises.
First, an offshore bond market should be built. Eligible domestic and foreign enterprises can be allowed to issue bonds in RMB or USD, and provide cross-border financing services for domestic and foreign enterprises through direct financing in the offshore bond market. On the one hand, it can provide more financing channels for enterprises in the free trade zone, effectively reduce the financing cost of domestic enterprises, and at the same time, it can also help to improve the degree of RMB internationalization and change the backward development of my country’s bond market.
Second, an offshore RMB stock market should be built. The listing of foreign companies in the country is an important indicator for evaluating the maturity of the offshore financial market. Since 2007, my country’s capital market has ranked fourth in the world, but the domestic stock market is still only open to domestic enterprises. The establishment of the Shanghai Free Trade Zone has provided an important opportunity to launch the “international board” stock market. In the future, the offshore financial center of the Free Trade Zone can try to establish a RMB stock issuance and trading market for overseas enterprises to provide multinational companies in the Free Trade Zone. Equity financing channels and cross-border equity financing support.
Finally, an offshore financial derivatives market should be established. Different from western developed countries, due to the existence of financial regulation, the development of my country’s financial derivatives market is relatively backward, and financial innovation needs to be deepened; on the other hand, the construction of Shanghai Free Trade Zone’s offshore financial center objectively requires the development of offshore financial derivatives The market provides risk management and risk hedging mechanisms for enterprises in the free trade zone. Specifically, it should follow the principle of serving the free trade zone, introduce financial derivatives products and investment tools, provide investors with a trading platform for cross-border financial derivatives such as futures, options, and swaps, and innovate and develop RMB derivatives. We will gradually introduce RMB-based financial derivatives such as bond option futures and individual stock option futures.
(3) Lower the entry threshold and tax rate, and introduce more offshore financial institutions
Judging from international experience, the construction of an offshore financial center requires the participation of a considerable number of offshore financial institutions. Among them, multinational banks are the main body of offshore financial business. Without the involvement of a certain number of foreign banks, offshore financial centers are often difficult to scale. . Therefore, in the future, the construction of an offshore financial center in the Shanghai Free Trade Zone should further reduce the entry threshold for foreign banks, and open offshore financial business equally to foreign banks in the Free Trade Zone. It is worth pointing out that the introduction of offshore financial institutions does not threaten the healthy development of my country’s financial industry, on the contrary, it will have a positive impact on my country’s financial institutions, especially the commercialization reform of banks. This is because, through the construction of offshore financial markets and the introduction of offshore financial institutions, domestic banks have joined the global capital cycle and actively participated in competition and cooperation in the international financial market, which will help break the “monopoly” in my country’s current financial industry operations. “Strengthening the financial competition mechanism, prompting domestic financial institutions to strengthen operation and management, improve services, create diversified business varieties, reduce costs, improve operational efficiency, and enhance the ability to prevent risks, play a role in forcing domestic financial institutions to reform.
In order to attract foreign financial institutions to participate in the construction of offshore financial centers, offshore enterprises should be given preferential tax rates and tax relief. Throughout the history of the formation of offshore financial centers, tax incentives for offshore enterprises are common to all countries in building offshore financial centers, and this is also the inherent law of international capital flows. Taking the formation of the US dollar market in Asia as an example, Hong Kong and Singapore are similar in terms of geography and infrastructure, and the formation of Hong Kong’s international financial center is earlier than that of Singapore, but the Singapore government has provided substantial tax relief for US dollar offshore business, and also The 1.5% interest withholding tax was waived, which prompted the Asian dollar market to finally settle in Singapore. In view of this, the future construction of an offshore financial center in the Shanghai Free Trade Zone should ensure that the tax rate for its offshore business operations is lower than the tax rate for similar domestic businesses, and that the tax burden of Shanghai’s offshore financial market is not higher than that of Hong Kong, Singapore and other offshore markets.The level of taxation in financial markets.
(4) Cooperation between Chinese enterprises and international offshore financial centers
1. Jersey
(1) Advantages:
Jersey has consistently ranked first in the GFCI as an offshore center, and has also been recognized by the International Monetary Fund (IMF), the Organization for Economic Cooperation and Development (OECD) and other institutions. Jersey is an administrative jurisdiction recognised by the OECD’s “white list” and has signed tax information sharing agreements with countries such as China. The International Monetary Fund ranks Jersey as a “highest” international financial centre, alongside those of the G20 and the European Union.​​
Jersey has nearly 13,000 professionals who are particularly skilled in financial services in areas such as banking, trust and fund management.​​
(2) How to help Chinese enterprises:
Jersey can help China in three ways.
First of all, many large international companies have established holding companies in Jersey as a listing tool to facilitate their capital flow into China and help China’s economic development.
Second, Jersey can help Chinese companies “go out”. At present, 65 Chinese companies are listed in London, of which 16 are registered in Jersey, accounting for about a quarter.
Third, the speed at which Chinese companies and individuals create wealth is astonishing, and Jersey can help wealthy Chinese invest in overseas markets. Due to the historical relationship between Hong Kong and the British Commonwealth, Jersey has decades of experience in providing fund management services to Hong Kong-funded enterprises, and now it also has certain experience in serving mainland Chinese enterprises. Jersey can make buying and selling more valuable and more efficient. If Chinese companies deal directly with counterparties, they may encounter various tax issues, and the transactions themselves may be subject to EU scrutiny. But if the transaction is done through a holding company or trust in Jersey, the problem is much simpler because the company is registered in Jersey rather than London. Taking listing in London as an example, a company registered in Jersey has exactly the same threshold as a British company listing in London. The reason why Jersey has this treatment is because of its good relationship with the UK. It should be noted that a holding company registered in Jersey is not a “bag company”, Jersey is a “physical” jurisdiction with a good regulatory environment.
2. Bermuda
(1) Advantages:
Bermuda’s financial services policy and environment are unique. Bermuda has a relaxed legal environment, a sound financial system, and developed financial services. In addition, Bermuda has a very low tax point, and there is no income tax and capital gains tax for locally incorporated businesses, which can avoid double taxation. At the same time, the company information of the investment company will be kept strictly confidential, and the protection of investors will be higher.
What is more worth mentioning is that, since the articles of association and framework of companies registered in Hong Kong are largely based on Bermuda and Cayman, it is easier to list companies in Hong Kong by registering companies here. Moreover, Bermuda is the best “springboard” for companies to list in Hong Kong, which is also Bermuda’s core advantage in attracting domestic companies.
In addition, investing in Bermuda also has the advantages of easier listing of registered companies, easier attraction of overseas investment, and easier realization of overseas mergers and acquisitions. Compared to other Caribbean financial centers, Bermuda is the closest to the United States. Important gateway cities such as New York and Boston can be reached within 1.5 hours. Therefore, Bermuda has also become the best choice platform for investing in the United States.
(2) Bermuda and China
Cheryl, CEO of Bermuda International Business Association, said that Bermuda has a long-term business promotion and development plan in China. “We hope the Shanghai Roadshow will be a brand new and successful start,” Cheryl said. “What I can disclose at the moment is that we are planning to hold meetings with relevant institutions and enterprises in Shanghai to conduct further communication and exchanges with these institutions and enterprises. Including the Shanghai Municipal Party Committee and Municipal Government, Industry and Commerce Bureau, Taxation Bureau, Shanghai Foreign Investment Development Bureau, China Council for the Promotion of International Trade Shanghai Branch, Shanghai Stock Exchange, as well as relevant chambers of commerce and enterprises, we will discuss and cooperate in depth according to market needs and hope to sign a memorandum of understanding with relevant departments in Shanghai to further clarify the areas and methods of future cooperation.”
Cheryl concluded by emphasizing: “Although our relationship with China is relatively new, looking back over the past 20 years, we are proud to support Chinese companies in overseas investment. There are now more than 700 China-related companies registered in Bermuda, and these companies Covering many fields such as energy, trade, real estate, pharmaceuticals and communications, their businesses are very active around the world, and we have ushered in a new beginning of win-win cooperation with Chinese partners.”

Reference：

Analysis of the Development of International Offshore Financial Market Xian Shi (China Financial Research Center, Southwestern University of Finance and Economics, Chengdu, 610074)

Construction Concept of Offshore Financial Center in Hainan Free Trade Zone Xu Wenbin (Beijing Information Technology University, Beijing 100192)

Opportunity: Focus on Bermuda, an Offshore Financial Center

Models and Institutional Arrangements for the Construction of Offshore Financial Centers in Shanghai Free Trade Zone Wang Chuan, Zhao Jin

What is the offshore financial market Haiyun Deng

Risk Control in Hong Kong’s Offshore Financial Markets Li Wanjin (Hainan University, Haikou 570228)

Mei Xinyu: Deciphering the Sins of Offshore Financial Centers in Paradise

There are three major conditions for an offshore financial center

The world’s three largest offshore financial markets