Cross-Border Cash Pool – Reform and Integration

Authors: Ting ZHENG丨Eryin YING丨Lin ZHU丨Hattie ZHANG

On April 1, 2025, the People's Bank of China ("PBoC") and the State Administration of Foreign Exchange ("SAFE") jointly issued the Notice on Issuing the Administrative Measures for Integrated RMB and Foreign Currency Cash Pooling of Multinational Corporations (Draft for Comments)^[1] ("Draft High-version Cash Pooling"), aiming to promote nationwide the relatively mature High-version Cash Pooling (defined below) policies developed in earlier pilot programs.  On July 25, 2025, PBoC and SAFE jointly issued the Notice on Issuing the Administrative Measures for Centralized Operation and Management of Cross-Border RMB and Foreign Currencies by Multinational Corporations (Draft for Comments)^[2] ("Draft Low-version Cash Pooling"), in order to achieve nationwide application of the relatively mature Low-version Cash Pooling (defined below) policies developed in earlier pilot programs.

I.  Evolution of various cross-border cash pooling regimes

Prior to 2020, there existed two separate regimes: the cross-border two-way RMB cash pooling led by PBoC, and the SAFE version cash pooling.  At that time, if a multinational corporation ("MNC") needed to pool RMB and foreign currency (“FCY”) funds, the same corporate group had to establish separate RMB and FCY cash pools, resulting in high construction and maintenance costs for the MNC.  In addition, cross-border two-way RMB cash pooling was regulated by varying policies.  For example, in Shanghai, there were three types of cross-border two-way RMB cash pooling businesses, operated respectively under: (1) the Notice of the People's Bank of China on Further Facilitating Multinational Enterprise Groups in Operation of the Cross-Border Two-way RMB Cash Pooling Business ("National Version"); (2) the Notice of Shanghai Head Office of People's Bank of China on Efforts to Promote Cross-Border Use of RMB in China (Shanghai) Pilot Free Trade Zone ("Shanghai FTZ Version"); and (3) the Notice on Further Expanding Cross-Border Financial Service Functions in Pilot Free Trade Zones to Support Scientific and Technological Innovation and the Real Economy ("FT Version").

Given the variety of cash pooling regimes, differing thresholds, and complex applicability, since 2021, PBoC and SAFE have actively explored an integration plan to better support effective use of cash pooling.  This resulted in pilot programs for the integrated RMB and FCY cash pooling of MNCs ("High-version Cash Pooling") and the centralized operation of cross-border funds ("Low-version Cash Pooling").

To facilitate your understanding of the integration, we summarize below the evolution of High-version Cash Pooling and Low-version Cash Pooling regimes:

• High-version Cash Pooling Pilot 1.0: In March 2021, PBoC and SAFE issued the People's Bank of China and the State Administration of Foreign Exchange Further Facilitating the Overall Use of Cross-Border Funds by MNCs, and selected five large and high-credit-rating MNCs each in Beijing and Shenzhen to implement the first-batch pilot of integrated RMB and FCY cash pooling.  High-version Cash Pooling 1.0 combined the policy advantages of PBoC's RMB cash pooling and SAFE's FCY cash pooling, i.e., (1) appropriately adjusted foreign debt and overseas lending quotas, (2) allowed FCY settlement funds in the domestic master (sub-) fund account of the head company to be directly transferred to the RMB domestic master (sub-) fund account, (3) enabled funds in the domestic master fund account to be directly downstream swept to proprietary accounts of member enterprises for related businesses, and (4) permitted voluntary FCY purchases within certain quotas.

• High-version Cash Pooling Pilot 2.0: In July 2022, PBoC and SAFE announced that an upgraded pilot program of the integrated RMB and FCY cash pooling shall be expanded to 8+"2" regions, including Shanghai, Beijing, Jiangsu, Zhejiang, Guangdong, Hainan, Shaanxi, Ningbo, Qingdao, and Shenzhen.  High-version Cash Pooling Pilot 2.0 mainly: (1) increased the number of pilot regions and enterprises; (2) allowed MNCs to handle centralized receipts and payments in both RMB and FCY for overseas member enterprises domestically; and (3) further facilitated cross-border receipts and payments in RMB for MNCs.

• High-version Cash Pooling Pilot 3.0: In December 2024, adhering to the principle of "iterative upgrading and phased promotion", PBoC and SAFE further upgraded the policies across all ten regions in pilot 2.0.  In January 2025, new regulations for integrated RMB and FCY cash pooling, including but not limited to the Pilot Management Regulations of the Integrated RMB and FCY Cash Pooling Business of Multinational Companies in Shanghai, were issued in Beijing, Guangdong, Shanghai, and other regions, commonly referred to as High-version Cash Pooling 3.0.  Key measures included: (1) enhancing the convenience of cross-border fund flow for MNCs, allowing MNCs to handle related businesses within foreign debt and overseas lending quotas directly upon payment instructions; (2) allowing the head company to handle centralized receipts and payments on behalf of overseas member enterprises with domestic member enterprises or other overseas entities, provided the transaction background is authentic and compliant; (3) increasing the flexibility of cross-border fund flow by allowing partial consolidation of foreign debt and overseas lending quotas for MNCs while moderately retaining flexibility in financial arrangements for individual member enterprises; (4) allowing cross-currency lending among domestic member enterprises for cross-border payments under current accounts to reduce financing costs; and (5) simplifying filing procedures and diversifying available filing methods by delegating such functions not involving foreign debt or overseas lending quotas such as capital account changes and changes to the names of the head company or member enterprises to cooperating banks.

• Expanding the High-version Cash Pooling Nationwide: The release of the Draft High-version Cash Pooling is intended for nationwide application of the relatively mature High-version Cash Pooling policies developed from the earlier pilots.

• Low-version Cash Pooling Pilot 1.0: In May 2023, PBoC and SAFE announced optimized and upgraded policies on the centralized cross-border operation and management of RMB and FCY funds by MNCs in Beijing, Guangdong, and Shenzhen to support centralized operations of cross-border RMB funds by MNCs.  From June to July 2023, local SAFE branches in these three regions issued the Administrative Measures for Centralized Operation and Management of Cross-Border RMB and FCY Funds by MNCs (Pilot Scheme).

• Expanding the Low-version Cash Pooling Nationwide: The release of the Draft Low-version Cash Pooling is intended to achieve nationwide application of the relatively mature Low-version Cash Pooling policies developed from the earlier pilots.

II.   Comparison and analysis of regulatory policies for various cash pools

[1]http://www.pbc.gov.cn/tiaofasi/144941/144979/3941920/5650333/index.html.

[2]http://www.pbc.gov.cn/tiaofasi/144941/144979/3941920/5791563/2025072517061862808.pdf.

[3] Strictly speaking, with respect to the National Version cross-border two-way RMB cash pooling, the essence of the cash pooling is the internal sweeping and centralization of surplus and deficit within a MNC group. It cannot be used for profit repatriation, capital contributions, outbound direct investment (ODI), inward or outward remittance of funds related to goods and services trade, or other cross-border fund transfers through the cash pool. In addition, centralized receipts and payments under the current account cannot be conducted via the cash pooling. The cross-border RMB centralized receipts and payments under the current account is an independent business from the National Version cross-border two-way RMB cash pooling, in accordance with the Notice of the People's Bank of China on Matters concerning Centralized Cross-Border RMB Fund Operation Conducted by Multinational Enterprise Groups (Yin Fa [2014] No. 324). For simplicity purposes, this article does not distinguish strictly between these two different businesses.

[4] Similar to the National Version cross-border two-way RMB cash pooling, strictly speaking, the cross-border RMB centralized receipts and payments business under the current account in the pilot region is an independent business from the cross-border two-way RMB cash pooling in the pilot region, handled in accordance with the Notice of Shanghai Head Office of People's Bank of China on Efforts to Promote Cross-Border Use of RMB in China (Shanghai) Pilot Free Trade Zone. For simplicity purpose, this article does not distinguish strictly between these two different businesses.