On July 22, the State Administration of Foreign Exchange (SAFE) disclosed the foreign exchange inflow and outflow data for the first half of 2025 during a State Council press conference. Addressing the ongoing reforms in China's Free Trade Zones (FTZs), Xiao Sheng, Director of SAFE's Capital Account Management Department, outlined the latest measures aimed at deepening the country's high-level opening-up through expanded pilot policies in FTZs.

Since 2022, SAFE has initiated cross-border trade and investment pilot programs within designated areas of four FTZs—Shanghai, Guangdong, Hainan, and Ningbo. These pioneering policies have since extended to include Beijing and Jiangsu. The current phase involves further enlarging the scope of these initiatives to encompass more FTZs nationwide, with the goal of unleashing wider institutional innovation dividends and promoting higher standards of openness in the foreign exchange system.

The planned expansion centers around two key dimensions: advancing cross-border trade facilitation and promoting elevated levels of openness in cross-border investment and financing.

First, in cross-border trade facilitation, five core policies have been identified. These include encouraging banks to optimize new international trade settlement services, expanding the range of netting settlement for trade receipts and payments, and streamlining foreign exchange payments and receipts under current account items. These adjustments focus on simplifying business review procedures, reducing documentary requirements, and easing administrative processes, thereby enabling enterprises to conduct cross-border trade more conveniently.

Second, the policies aim to push forward the high-level opening of cross-border investment and financing. Among the measures are the pilot program for foreign exchange management of Qualified Foreign Limited Partners (QFLP), the direct handling of foreign debt registration by banks, and allowing parent and subsidiary companies in financial leasing businesses to share foreign debt quotas. Collectively, these initiatives intend to diversify cross-border financing channels, improve efficiency in investment and financing, and support foreign capital stabilization and enhanced openness.

The QFLP pilot, in particular, facilitates foreign long-term capital entering China via private equity investment, thus bolstering the development of domestic enterprises, especially technology-driven firms. This move simplifies access for foreign limited partners, encouraging greater participation in industrial and real-sector investments.

Looking ahead, Xiao Sheng affirmed that SAFE will continue to pioneer foreign exchange innovation policies within FTZs. This effort is expected to lead deep reforms and foster high-level opening-up in the foreign exchange domain. Alongside, SAFE plans to continuously improve the quality of foreign exchange financial services and strengthen the capacity for cross-border regulatory supervision under open conditions, thereby better serving the real economy's high-quality development.

In essence, the expansion of pilot programs underscores China's commitment to refining its foreign exchange management framework through targeted, phased reforms within FTZs. The approach balances facilitation and supervision, aiming to create a more efficient environment for cross-border trade and investment.

This latest development provides critical clarity for foreign enterprises, financial institutions, and investors engaging with China’s increasingly integrated and dynamic economy. The streamlined processes and broadened financing options within FTZs will enhance operational efficiency and financial flexibility, addressing some of the long-standing challenges in cross-border capital flows.

By focusing on expanding successful pilot experiences, China is methodically laying the groundwork for a more open and internationally aligned foreign exchange system. This incremental approach aligns with broader national strategies to optimize institutional frameworks and support sustained economic growth.