Before we begin, let’s break down each account type within the context of the Hainan Free Trade Port:
EF (electronic fence) Account (Multi-functional Free Trade Account):
Definition: EF is a “Multi-functional Free Trade Account”.
Purpose: These accounts are established within the Hainan Free Trade Port to facilitate cross-border trade and investment activities.
Functionality: Streamlined processes for fund transfers, foreign exchange transactions, and other financial activities.
Enables efficient cross-border transactions.
Separated from existing local and foreign currency accounts.
Beneficiaries: Market entities operating within the Hainan FTP.
Currency: Can handle both RMB and foreign currencies.
Key Features: Facilitates trade receipts and payments, foreign investment, overseas lending, foreign debt, foreign exchange settlement and sales, working capital loans, and letter of credit financing.
EFE Account (Multi-functional Free Trade Account in RMB):
Definition: EFE is a “Multi-functional Free Trade Account in RMB”.
Purpose: Specifically refers to EF accounts denominated in Chinese Yuan (RMB).
Functionality: Same as EF accounts but denominated in RMB.
Allows businesses to conduct cross-border transactions and investments using RMB.
Beneficiaries: Domestic Chinese companies.
Currency: Denominated in RMB.
Key Features: Provides added flexibility and convenience for domestic businesses.
EFN Account (Multi-functional Free Trade Account in Foreign Currency):
Definition: EFN is a “Multi-functional Free Trade Account in Foreign Currency”.
Purpose: Similar to EFE accounts but denominated in foreign currencies (e.g., US dollars, euros).
Functionality: Allows foreign companies operating within the Hainan Free Trade Port to manage funds in foreign currencies.
Simplifies cross-border transactions.
Easy conversion between foreign currencies and RMB.
Beneficiaries: Foreign companies operating in Hainan.
Currency: Denominated in foreign currencies.
Key Features: Enhances convenience for international businesses.
These specialized accounts cater to the unique needs of businesses within the Hainan Free Trade Port, promoting seamless cross-border trade and investment.
launch of EF accounts in Hainan
On the first day of the launch of EF accounts in Hainan, 10 banks that were among the first to offer EF accounts opened accounts for a total of 34 companies. Among these, 27 domestic companies registered in Hainan opened EFE accounts, while 7 overseas companies opened EFN accounts.
Tan Hanqiu, financial manager of Sede International Trade (Hainan) Co., Ltd., said “Previously, cross-border fund transfers took 1-2 days from remittance application to preparation of documents, but with an EF account, transfers within the cross-secondary line with the same name are completed in minutes. It’s an incredibly smooth experience,” she remarked.
Sede International Trade (Hainan) Co., Ltd. also processed a $6.91 million foreign exchange purchase and overseas lending business through their EF account, which exempted them from overseas lending registration, further shortening transaction processing time. “In the future, we will also expand the scale and variety of EF account business in accordance with policies,” Tan Hanqiu stated.
The launch of EF accounts has been well-received, providing significant benefits such as convenience, freedom, and cost savings. From the perspective of free trade port construction, the continuous improvement in the convenience and openness of cross-border financial services will further enhance the attractiveness and competitiveness of the free trade port, achieving a higher level of openness.
Financial institutions play a crucial role in enabling enterprises the convenience of EF accounts. Banks in Hainan are actively promoting and implementing the EF account system, supporting more outward-oriented enterprises and multinational corporations in opening and utilizing EF accounts.
According to Ning Jing, Senior Manager of the Transaction Banking Department of the Hainan Branch of the Bank of China, institutions within the free trade port can handle cross-border transactions, excluding securities investments, through multi-functional free trade accounts without being subject to current related quotas and approval restrictions.
This results in a significant reduction in processing procedures and a notable improvement for enterprises. “For example, enterprises can handle external debt transactions through multi-functional free trade accounts without being subject to borrowing limits or the need to register external debts and open special accounts at the bank,” she explained.
Ning Jing further noted that the transfer of funds between multi-functional free trade accounts and domestic RMB accounts follows a “limited penetration” principle based on a “negative list + quota management” approach, enhancing the efficiency of fund transfers.
“If a company’s owner’s equity in the previous year was 10 million RMB, then the upper limit for net inflows/outflows of same-name transfers would be 10 million RMB. They can transfer funds between the accounts with the same name in accordance with the negative list and within the 10 million RMB quota.
This means that companies can freely transfer funds between the two accounts according to their own financial needs, without the need for document review,” she explained.
Some banking professionals also expressed that with the implementation of EF accounts, it brings convenience to enterprises within the free trade port, helping them to deepen their presence in Hainan and attracting more businesses to invest and operate within the free trade port.
Additionally, with the introduction of multi-functional free trade accounts, various banking institutions will have more room for innovative business development, driving the growth of the modern financial industry.
Related article: Compilation of important policies for Hainan Free Trade Port (February 2024)
