The People's Bank of China recently issued guidance in support of the construction of the pilot free trade zone in Guangdong. The guidance covers six aspects including general principles, the cross-border use of the RMB, foreign exchange management reform, financial cooperation with Hong Kong and Macao, financial services improvement and risk monitoring and management. These will be of great importance to the financial innovation in different areas of the free trade zone, namely, Qianhai, Hengqin and Nansha.

A free trade zone lives on institutional innovations, including economic function-related innovation and national strategy-related innovation. On the one hand, Zhuhai needs to foster its advanced equipment manufacturing industry and become a leader in the west of the Pearl River and build a new economic growth pole in the Pearl River Delta. On the other hand, Hengqin needs to make full use of the People's Bank of China's new policies to promote the ‘Belt and Road' initiative and deepen Guangdong-Hong Kong-Macao regional financial cooperation.

As for economic function-related innovation, market orientation effects should be focused on and companies should take the lead in financial innovation. At present, tens of thousands of Hong Kong, Macao and Taiwan enterprises as well as foreign-funded enterprises are engaged in import and export trade, cross-border mergers and acquisitions, and cross-border investment and financing in the Pearl River Delta region. This involves huge foreign exchange, cross-border currency settlements and payments, and cross-border asset mortgages as well.

Particularly, Hong Kong is China's largest offshore RMB settlement center. As one of the three areas of the Guangdong pilot free trade zone, Hengqin may attract more offshore RMB from Hong Kong and Macao. This not only meets the financing demands of enterprises and individuals but also strengthens Zhuhai's role as a financial center in the areas west of the Pearl River and even west Guangdong on a larger scale. With finance as the bridge, it's expected that the modern service industry in Hong Kong and Macao will have greater impact on the development of that in the areas west of the Pearl River.

Regarding national strategy-related innovation, Hengqin should focus on its cross-border e–commerce investment and financing with Portuguese-speaking countries. In fact, there are many Portuguese-speaking countries in both Latin America and Africa, such as Brazil and Angola. Therefore, cross-border e-commerce will greatly advance the ‘One Belt One Road' strategy.

Hengqin has the conditions to promote cooperation between the regional financial institutions and Internet payment agencies and actively carry out cross-border RMB settlement. With the implementation of the ‘Belt and Road' strategy, China's trade with Portuguese-speaking countries in Europe, Latin America and Africa through e-commerce platforms will grow quickly. Moreover, the amount of cross-border settlement handled by these e-commerce platforms will also grow rapidly.

More importantly, Hengqin is actually aiming to deepen cooperation with Macao to successfully introduce the resources of Hong Kong, the international financial center, to the areas west of the Pearl River at the same time. In this way, another national strategy, the economic integration of Guangdong, Hong Kong and Macao, will be achieved. Such a chance must not be missed in Hengqin.

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