THE Shanghai Financial Services Office recently published its quarterly group of case studies highlighting companies that have shown innovation in their finance-related activities in the city’s pilot Free Trade Zone.

The report comprised nine cases spanning the banking, insurance and securities sectors.

Shanghai Daily has selected four of the cases to illustrate how the zone is benefiting companies and individuals.

The five cases not included are: the new international gold exchange, a centralized payment system set up by an online travel company, an offshore acquisition financed by the Shanghai branch of China Merchants Bank, shipping insurance policies developed by the Shanghai Institute of Marine Insurance, and cross-border re-insurance and insurance sales programs initiated by Taiping Life Insurance Co.

Cross-border bill paying

The Shanghai branch of the Bank of China has teamed up with the bank’s Hong Kong unit and Shanghai FFT, a household bill payment company, to offer cross-border bill-paying services to Hong Kong and Shanghai residents who own out-of-town properties.

Mainland clients can use Shanghai FFT’s website to pay for utility bills and management fees on properties they own in Hong Kong, while Hong Kong clients can use the Bank of China’s online banking system to pay mainland bills.

The program is expected to benefit about 300,000 Hong Kong residents with properties on the mainland and about 400,000 mainlanders with houses in Hong Kong.

It is the only livelihood-related cross-border bill payment system created thus far after the People’s Bank of China last year began allowing cross-border transactions by payment companies located in the Shanghai pilot Free Trade Zone.

Payment companies holding an Internet payment license and registered in Shanghai or with units in the Free Trade Zone are eligible to handle cross-border yuan payments for goods and services. The money cannot be used to invest in the capital market.

The Bank of China said it will work with more partners to expand the Shanghai-Hong Kong payment channel to cover more items.

Financing for smaller businesses

The Shanghai branch of the Agricultural Bank of China is tapping the benefits of free trade accounts and cross-border funding channels to lower funding and foreign-exchange costs for medium-size and small enterprises.

The bank is offering lending, trade financing, cross-border settlement and foreign-exchange services under newly introduced Free Trade Zone regulations. Under the free trade account program, the bank can lend offshore yuan to companies at offshore rates, which can be up to a third lower than onshore rates.

The channel allows banks more latitude in setting interest rates for medium-size and small companies with otherwise weak credit records that would normally attract high lending rates.

Foreign companies with units in the zone can issue letters of credit to another offshore entity, helping the latter obtain low-cost credit from the bank using a free trade account designated for foreign users.

With the free trade accounts, companies can also benefit from lower foreign-exchange costs because they can choose to use offshore exchange rates when they are more favorable than onshore ones.

Clients of the bank in the zone include clothing exporters and foreign traders.

Return to domestic listings

An affiliate of the Orient Securities Co, using a merger and acquisition fund set up in the Free Trade Zone, has helped a Chinese company delist from a foreign stock exchange and go public on the domestic A-share market.

Orient Securities used the fund to acquire all the shares of a foreign-listed company under the Overseas Direct Investment program.

The fund also obtained offshore US dollar merger-and-acquisition loans and used trust custody services to complete the privatization.

Orient Securities said the Free Trade Zone could become an efficient merger-and-acquisition platform because funds can be quickly registered and many fund-raising channels are available.

It took Orient Securities only 20 days to draw up the plan, complete approval procedures, convert currencies and complete money transactions, marking a breakthrough from the laborious and drawn-out administrative procedures previously required, the brokerage said.

Cross-border funding rules in the zone also allow access to US dollar-denominated loans offshore, effectively lowering transaction costs.

Companies listed abroad are usually valued at a lower price than those listed domestically, and the shift back to the domestic stock market can greatly boost fund-raising opportunities.

Through similar operations, Orient Securities is expected to help more foreign-listed companies return to Chinese mainland listings.

Care for the elderly

China Pacific Insurance Group, China’s third-largest insurer, has set up an elderly care investment company under relaxed foreign investment and capital management policies offered in the zone.

It is the first specialized investment company of its kind, established as part of attempts to broaden investment options for insurance funds in the Free Trade Zone.

The new investment company will be involved in investment, construction and operation of senior care facilities. It also will handle health care and medical investment businesses which are related to those projects. The company said the rich resources and policy advantages of the Free Trade Zone enable it to engage in more efficient capital management and act as a conduit for investment, professional talent and facilities from overseas.

Because foreign investment companies are also allowed to undertake a wider variety of elderly care services in the zone, it is easier for the new company to find foreign partners or explore acquisition opportunities.

China Pacific said the company’s first project will begin early next year with the reconstruction of its former training center in Xuhui District into a senior care facility.

The company said it plans to expand the business beyond Shanghai and the coastal region to major cities nationwide within five years.

It will start by purchasing or leasing existing properties in Shanghai’s downtown areas and turning them into senior care facilities, providing long-term services for middle and high-income people.