Yiwu becomes latest region to embark on financial reform

Yiwu's government on Tuesday released a seven-point financial-reform plan that aims to build the export-oriented city in Zhejiang province into a financial trading center for local exporters.

The plan includes a trial program for individual cross-border yuan trade settlements.

The draft plan, originally submitted by the city on Dec 26, 2012, was approved by the State Council on Aug 23.

The cabinet's move makes Yiwu the fourth region in China to launch financial reforms after the cities of Wenzhou (also in Zhejiang), Quanzhou (in Fujian province) and the Pearl River Delta region as a whole.

City officials held a news conference on Tuesday where they released a summary of the reform plan. The program aims to develop a financial system that will boost the city's role in global trade, as well as promote economic and industrial upgrading by 2020.

Yiwu is the first city in China to have individual cross-border yuan trade settlements, which are intended to be an innovative financial product to promote the growth of trade conducted by independent entrepreneurs in the city. The settlement program was approved at the end of 2012 by the People's Bank of China.

As the country's largest wholesale market for small commodities such as household gadgets and toys, Yiwu was chosen to test the trade-settlement system to highlight the importance of reform through financial innovation.

Many independent entrepreneurs in Yiwu sell items for export, making the city an international trade hub.

Since 2012, "the trial cross-border yuan trade settlement has helped local individuals to complete deals valued more than 6 billion yuan ($980 million)", Mayor He Meihua told the news conference.

He said the program gives local entrepreneurs a hedge against currency risk.

Cross-border e-commerce services and online-payment services also will be expanded, since Yiwu's e-commerce market is growing faster than the brick-and-mortar sector.

Replacing physical shops with e-commerce platforms to expand exports has turned out to be a way for small and medium-sized enterprises in Yiwu to gain more foreign clients, especially in difficult times.

The city aims to combine global trading with financial reform to have more innovative financial products for exporters, the mayor said.

He added that private capital management also would be a focus of the reforms, with the goal of a deeper, more diverse and increasingly convenient financial system.

Under the reform program, Yiwu will apply its advantages in financial trading, financial logistics and global finance to work with neighboring cities in Zhejiang province, as well as Shanghai.

"This is a great opportunity for Yiwu to exploit its advantages in global trading and cooperate with Shanghai on its coming launch of a free trade zone," said Sheng Yijun, the deputy director of Zhejiang's provincial finance office.

Another aspect of the reform program will be an up-to-date platform gathering information on online trading, logistics, warehouse operations and financial service to assist local businesses.

A trading information database of non-residents in the city also will be established to allow overseas individuals to have personal foreign-currency accounts in the city after obtaining a business license.

"Information platforms, including a credit rating system, will offer a healthy investment environment and complete information database for all businesses in Yiwu to know about the global trading development," said Guo Anna, the assistant inspector of the Hangzhou branch of the PBOC, China's central bank.

Guo added that a database of online transaction records in the city would be launched as well.

As the next step, Yiwu aims to release a three-year detailed program of its financial reforms by the end of the year.