As Hainan undergoes a wave of economic globalization and financial liberalization, companies are increasingly focused on effectively utilizing financial instruments to integrate into the international market more rapidly and completely.

May 6 this year saw the official launch of the highly anticipated Hainan Free Trade Port (FTP) multi-function free trade account (EF [Electronic Fence] account) system. The implementation of EF accounts for enterprises in the Hainan FTP brings obvious benefits for their cross-border operations, allowing enterprises to efficiently coordinate the use of financial resources in both domestic and international markets and develop international business at a higher level.

A counter dedicated to EF account services has been opened at the Hainan branch of the Bank of China. (Photo: Hainan Daily App)

An "expressway" for capital flow

Hainan Guomao Industrial Co., Ltd. mainly engages in supply chain management services for bulk commodities such as coal, pulp & paper, petroleum chemicals, and steel. The company successfully opened an EF account at the provincial branch of China Construction Bank the day the EF account system was launched, going on to make a transfer between the EF account and a same-name domestic account across the "second line" and a cross-border transfer across the "first line."

"Something that is noticeable compared to cross-border transactions via traditional means is the elimination of the requirement to provide supporting documentation for each transaction and the time saved by no longer needing to visit the bank multiple times." A representative of the company said that thanks to the ability to transfer funds between the EF account and same-name domestic accounts across the "second line" and process fund transfers between the EF account and overseas accounts with just payment and collection instructions, its banking efficiency has been greatly improved.

Something even more enticing is that if Hainan Guomao Industrial Co., Ltd. handles foreign exchange settlements through its EF account, it can do so at offshore exchange rates. "We will utilize both domestic and overseas markets to help companies reduce exchange losses and lower financial costs," the provincial branch of China Construction Bank explained.

Sinomach Hainan Development Co., Ltd.’s main business is currently bulk grain imports and cross-border e-commerce. Xia Huan, the company's Chief Financial Officer (CFO), mentioned that the flow of funds is time-sensitive when it comes to cross-border e-commerce. EF accounts and the liberalization of fund transfers across the "first line" enable rapid collection and payment. This will help the firm further expand and develop new types of offshore international trade business.

Attracting investment to enhance the global appeal of the Hainan FTP

Be it increased convenience, liberalization, or savings; the advantages of EF accounts are at the core of benefits felt by enterprises.

"EF accounts are different from our ordinary accounts and are managed separately. It is common knowledge that regular CNY and foreign currency accounts are subject to different management rules. EF accounts, however, are integrated domestic and foreign currency accounts. The exchange of funds in these accounts is subject to the offshore exchange rate. There is no need to provide proof of the purpose of foreign exchange settlement, but foreign exchange settlement information must be reported to the relevant system of the State Administration of Foreign Exchange. Ordinary accounts usually only support a single currency," explained Yue Zhihai, deputy general manager of China Merchants Bank's Haikou branch.

The special nature of EF accounts allows banking institutions within the Hainan FTP to flexibly handle cross-border trade funds settlement, cross-border investment and financing, foreign exchange, and other transactions for their customers according to their needs, giving enterprises a near-seamless and smooth experience when transferring funds or processing capital accounts.

Hainan Ausca International Oils and Grains Co., Ltd. was one of the first foreign trade companies in the Hainan FTP to open an EF account. With their EF account, the collection and payment of funds for transactions such as payment for goods, shipping costs, and demurrage can be directly processed through collection and payment instructions, offering greater convenience than a general domestic settlement account.

"The EF account offers more offshore foreign exchange settlement price options, enabling us to refer to different market exchange rates to choose the right time to settle." Zhang Hui, chairman of Ausca, said that she hopes the EF account can bring substantive dividends to the company.

Aerial view of the Yangpu International Container Terminal in Danzhou, Hainan. (Photo: Hainan Daily)

In addition to Ausca, other companies that have opened EF accounts in the Danzhou-Yangpu Economic Circle include Hainan Yisheng, Hainan Jinhai Pulp and Paper, C&D (Hainan), and JD Group (Danzhou), encompassing many key industries such as petrochemicals, bulk commodity trading, health foods, and modern logistics.

Insiders at several banking institutions have concluded that the continued improvements in the facilitation and liberalization of cross-border financial services will further enhance the attractiveness and competitiveness of the Hainan FTP, promote the development of its business environment, and be conducive to attracting foreign investment and achieving a higher level of openness.

Currently, ten banks in Hainan have launched EF accounts. The banks have stated that they will continue to enrich cross-border financial product and service solutions, provide enterprises with high-quality integrated services at home and abroad, and improve the quality and efficiency of financial services for the real economy.