context: For more than a decade Shanghai's international financial centre ambition has run into one limit: a global centre needs the free capital flows Beijing will not grant. The new Shanghai international financial centre offshore finance action plan, issued at the 17 Jun 2026 Lujiazui forum, answers that by ring-fencing an offshore layer inside Shanghai's Pudong discrete rather than opening the capital account. It is the first plan to treat offshore finance as a standalone build with its own decade-long timetable, and it casts Shanghai alongside Hong Kong rather than in place of it.
Lian Ping 连平 China Chief Economists Forum chair unpacks the latest offshore finance action plan
- background
- offshore finance emerged in the 1950s as dollars flowed into Europe under the Marshall Plan
- historically, it took different forms
- in London and Hong Kong, on-shore and offshore finance are integrated
- in 1980s US/Tokyo models, onshore and offshore finance are separated to some extent
- Shanghai's new system follows the New York/Tokyo model, not Hong Kong's integrated one
- physically located in Pudong, with specific business lines opened to offshore-style operation while remaining formally onshore
- meant to support PRC firms now operating globally, and developing-country partners seeking lower-cost financing
- Shanghai’s proximity to PRC firms’ headquarter offers convenience in management and operations
- offshore RMB liquidity management also gives the People's Bank of China a new policy lever, paralleling how the Fed uses New York's offshore market
- adjustment via Shanghai’s offshore finance market could be more direct than Hong Kong
- offshore finance is the ‘final piece’ for Shanghai's international financial center ambitions
- the PRC isn't ready to fully liberalise capital flows, so offshore finance offers a controlled channel for deeper opening
- Western institutions currently capture most fee income from global offshore activity despite the PRC massive trade and shipping volumes
- stronger offshore capability lets the PRC capture more of this itself
- main characteristics of the action plan
- physical clustering in Pudong, the designated location of the pilot
- restricted eligibility
- limited to non-resident entities
- account segregation
- offshore and onshore accounts must be separated to prevent commingling
- three-phase rollout
- basic rules by 2027, a mature legal system by 2030, full strategic coordination by 2035
- early market data shows enthusiastic uptake
- six banks began offshore RMB FX trading pilots in Shanghai's FTZ in June 2026 following the new pilots
- daily trading volume jumped from C¥1 bn pre-pilot to C¥17 bn
- six banks began offshore RMB FX trading pilots in Shanghai's FTZ in June 2026 following the new pilots
- Liang expects growth to moderate sees eventual foreign institutional participation as necessary for the market to become genuinely global
- tax policy is flagged as a key design risk
- mature offshore centers keep tax rates internationally competitive and tailored by business line
- Asian offshore centers currently average 12-16 percent, well below onshore rates
- applying onshore tax logic to the offshore market would defeat its purpose, since the whole point is competing for non-resident business globally
- regulatory control should instead focus on strict oversight of the onshore-offshore interface to prevent arbitrage, money laundering and unauthorised flows
- mature offshore centers keep tax rates internationally competitive and tailored by business line
- Shanghai and Hong Kong are complementary, not competitive
- the PRC’s economic scale means offshore demand will keep growing for both—not a zero-sum split of a fixed pie
- Hong Kong's offshore business is anchored in the Greater Bay Area, Shanghai's is in the Yangtze River Delta
- though some competition is inevitable and healthy, pushing both markets better