At the 2026 Lujiazui Forum, a clear direction for capital account liberalization was established, representing a crucial component of China's high-level opening-up.
The "15th Five-Year Plan" proposes "enhancing the level of capital account openness." On June 17th at the forum, Zhu Hexin, Deputy Governor of the People's Bank of China and Administrator of the State Administration of Foreign Exchange (SAFE), delivered a significant speech sharing his perspectives on new patterns of global capital flows and China's capital account liberalization.
During the forum, Zhu Hexin officially announced the introduction of a new "package" of incremental policies, aiming to leverage the combined effects of existing and new measures to signal a commitment to advancing openness at a higher level and with greater quality.
Shanghai Lujiazui Finance & Trade Zone Development Co.,Ltd. serves as a key hub and testing ground for high-level financial openness. Notably, he emphasized stronger support for building Shanghai into an international financial center. "The next step will involve supporting Shanghai in piloting more flexible trade foreign exchange settlement, implementing facilitation measures for overseas investment of cross-border reinsurance income, and promoting policies like centralized fund management for multinational corporations to enhance the efficiency of institutional innovation," he stated.
Data from SAFE shows that this year, the scale of Shanghai's high-level cross-border trade openness pilot accounts for one-quarter of the city's current account foreign exchange receipts and payments. The city's corporate foreign exchange hedging ratio has risen to 38%. Policy benefits for technology innovation companies, including green bonds and the cross-border financial services platform, continue to be released. Bank foreign exchange business reforms have facilitated over $200 billion in transactions for enterprises.
New Package of Incremental Policies
Focusing on facilitating cross-border investment and financing, SAFE introduced nine new policy measures last year. At the forum, Zhu Hexin announced a forthcoming package of foreign exchange policy benefits to further promote cross-border investment and financing facilitation with more concrete measures.
Zhu Hexin indicated that, first, on the basis of the nine policies introduced last year, a new "package" of incremental policies will be added to leverage the integrated effect of stock and incremental measures. Second, a comprehensive reform of cross-border policies for Foreign Direct Investment (FDI) will be undertaken to better serve global enterprises investing in China.
Furthermore, support will be enhanced for domestic entities in global resource allocation. Building on this year's optimizations for domestic companies listing overseas and overseas lending, the authorities will actively respond to market demand by further simplifying exchange management for ODI and foreign debt, optimizing systems for foreign exchange loans and cross-border equity incentives, and issuing a new batch of QDII quotas.
This means that following the QDII quota expansion in March, another increase is imminent. On March 27th, SAFE data showed 78 domestic institutions were approved for a total of $5.3 billion in new QDII quotas, bringing the cumulative total to $176.169 billion for 193 financial institutions.
Market analysis suggests that amid significant global uncertainty, with stable performance in the RMB exchange rate and Chinese markets, expanding QDII quotas benefits domestic financial institutions in expanding overseas investments and provides more policy space for advancing RMB internationalization.
Four Directions for Enhancing Capital Account Openness
Capital account openness is a vital part of high-level financial opening and a key area for maintaining risk control.
How to proceed with capital account liberalization in an orderly manner while ensuring economic stability is a focus for international finance and domestic markets.
Regarding the path forward for continuously enhancing capital account openness, Zhu Hexin outlined the direction: deepening from channel-based opening to institutional opening, from business facilitation to entity facilitation, from foreign exchange management to coordinated domestic and foreign currency management, and from focusing on the exchange link to managing and servicing the entire chain.
Capital account openness essentially involves opening up rules and systems for cross-border capital flow management, with financial markets being a key area for institutional opening.
Zhu Hexin stated that efforts will be made to further open the securities issuance market, align securities trading market rules more closely with international standards, integrate open channels, optimize systems, unify rules, and enhance the level of two-way financial market openness.
The goal of capital account openness in serving the real economy is to better meet the increasingly diverse cross-border fund allocation needs of business entities. In recent years, SAFE has promoted reforms to facilitate cross-border investment and financing, significantly reducing administrative approvals and improving processing efficiency.
Zhu Hexin said the next step involves shifting further from "single-business facilitation" to "business-entity facilitation," and from "pre-approval" to "in-process monitoring and post-facto verification." Entities with stable operations and good credit will be granted higher levels of convenience.
Policies like bank foreign exchange business reform and multinational corporation cash pooling directly reflect this approach. The cash pooling policy, for example, has benefited over 1,100 multinational corporations and 20,000 member companies, facilitating over $2.4 trillion in cross-border payments and receipts.
Previously, overseas investors holding RMB financial assets were largely limited to RMB deposits or dim sum bonds in Hong Kong; now they can directly purchase RMB stocks and bonds in the mainland. RMB internationalization has endowed capital account openness with richer meaning.
Based on this, Zhu Hexin emphasized the need to better serve the circulation of RMB and foreign currencies, both onshore and offshore. The next steps will involve promoting more efficient coordination between foreign exchange management and cross-border RMB policies, supporting the development of the offshore RMB market, enriching RMB investment and hedging products, and providing stable institutional support for RMB internationalization.
Cross-border capital flows involve multiple links including fund exchange, underlying transactions, payment and settlement, risk hedging, and exit arrangements. Zhu Hexin stressed that the future perspective of capital account opening must also expand from the exchange link to the entire chain of cross-border capital flows. Through more systematic open policies, a sounder risk prevention system, and a more完善 governance framework, the level of open cooperation will be continuously enhanced while safeguarding security.
In recent years, China's capital account openness policies have been continuously refined, strongly supporting the growth and structural optimization of two-way cross-border capital flows. By the end of 2025, Chinese entities' overseas asset holdings reached $8 trillion, the stock of FDI in China reached $4 trillion, and foreign holdings of domestic stocks and bonds exceeded $1 trillion.
Sustained Expansion of the RMB's Financial Link Function
Amid changes in the international economic and financial landscape, the pattern of global capital flows continues to evolve.
Zhu Hexin noted that facing a more complex economic and financial environment, broader geopolitical and trade adjustments, and deeper industrial and technological transformations, global capital flows exhibit three new characteristics: increased volatility, deepening structural divergence, and strong resilience.
In his view, the new round of technological revolution and industrial transformation is accelerating breakthroughs, with global funds further concentrating in future industries. The rapid translation of new technologies into productivity gains, business model innovation, and industrial applications, coupled with the long-term impact of innovation on economic growth and income distribution, will profoundly influence the direction of global capital allocation.
In response to external uncertainties, China is injecting more certainty into global development. On one hand, the momentum for global innovation capital to allocate to China is strengthening; on the other hand, China is providing more patient capital to the world.
Zhu Hexin reported that in 2025, China's actual utilized foreign capital exceeded $100 billion, with high-tech industries accounting for about one-third. Foreign capital utilization in medical devices and aerospace grew by 42% and 23%, respectively.
In capital markets, the "technology narrative" is becoming clearer. By the end of Q1 2026, overseas investors held approximately $600 billion in domestic stock market value, with the information technology sector accounting for about $90 billion.
In China's outward investment, direct investment—characterized by long cycles and strong operational attributes—holds a relatively high proportion, reaching 45% in 2025. China's outward investment stock has ranked among the top three globally for nine consecutive years, spanning over 190 countries and regions, supporting global industrial and supply chain resilience.
In the two-way interaction between China and global capital flows, the RMB's function as a financial link continues to expand. The cross-border use of RMB and capital account openness mutually reinforce each other. The proportion of cross-border RMB receipts and payments under the capital account has risen to around 60%.
Zhu Hexin stated that backed by its good credit, stable value, relatively low financing costs, and an increasingly完善 payment and clearing network, the RMB provides global entities with diversified currency options and risk diversification tools, also creating more stable and predictable financial conditions for cross-border capital flows.
Comments