Shanghai is once again rewriting the rulebook on financial openness—this time through a local law. On May 1, 2025, China's first regional regulation specifically governing Free Trade (FT) account operations will come into force in the Pudong New Area. The regulation, formally titled Provisions on Promoting the Development of Free Trade Account Business in the China (Shanghai) Pilot Free Trade Zone in Pudong New Area, marks a key milestone in Shanghai's effort to legalize, streamline, and internationalize cross-border financial flows.

The FT account system, launched in 2014 as a pilot in Shanghai, is designed to facilitate more flexible capital movement between the Shanghai Free Trade Zone (FTZ) and overseas markets. By the end of 2024, over 170,000 FT accounts had been opened in the city, with cross-border transactions via these accounts growing at an average annual rate of more than 30% in RMB terms. Non-resident enterprise usage has grown even faster, with nearly 40% year-on-year growth.

So why a law now, more than a decade into the pilot? The short answer: scale and complexity. As multinational firms and non-resident investors increasingly turn to FT accounts for real-time capital pooling, mergers, and direct investment, the system's soft infrastructure—rules, coordination, risk control—must catch up.

This new regulation does exactly that. It codifies responsibilities across local and national authorities, introduces clearer risk-tolerant mechanisms, and, critically, modernizes account rules. Banks are now encouraged to provide digitized onboarding for foreign companies and expand FT account services for cross-border investments. Funds can move more freely across regulatory boundaries, with streamlined “cross-first-line” and facilitated “cross-second-line” transfers.

The regulation also encourages bold use cases that previously lived in regulatory gray zones. Banks can now use FT accounts to issue merger and acquisition loans for overseas deals via branches in the Lin-gang Special Area, with eased restrictions on loan ratios and maturities. Qualified enterprises involved in commodity trading or multinational operations can conduct cross-border hedging—provided they work with domestic futures brokers authorized to operate offshore.

It's not just about corporates. The law opens new channels for overseas individuals to directly invest in China's high-tech and strategic emerging industries via FT accounts. These accounts will support a wider range of personal settlements too, including income transfers, living expenses, and even potential travel or healthcare payments for foreigners residing in the FTZ.

Lu Hua, professor at Fudan University's School of Economics, noted that FT accounts are increasingly becoming a financial lifeline for cross-border e-commerce and biopharma firms seeking flexible capital tools. The law's broadened scenarios reflect these rising needs. “It's a signal to global capital: Shanghai is not only open, it's getting smarter about being open,” she said.

Meanwhile, Cao Xiao, head of the School of Finance at Shanghai University of Finance and Economics, pointed to the deepened integration of domestic and foreign currency services as a key step forward. “We're seeing a regulatory system evolve to support the full lifecycle of cross-border capital use—from entry to operation to exit,” he said.

There's still a long road ahead. Lawyers like Ma Chenguang, senior partner at Co-effort Law Firm LLP, warn that full effectiveness will require tight coordination between local innovation and national supervision. Yet if done right, this legal leap could allow Shanghai to offer one of the most functionally liberal, yet legally sound, cross-border financial gateways in Asia.

For foreign firms, especially those eyeing China's capital markets or building Asia-based treasury centers, the FT account—now with legal teeth—may just be the missing piece.