ABSTRACT
Offshore bank business in China has experienced a tortuous process. Developing offshore financial markets under the background that interest rates and exchange rates in China have not yet been fully market-oriented will inevitably lead to offshore financial markets' impact on the economy. Regulatory authorities originally intended to separate inside from outside when Japanese offshore financial market (JOM) was established, but penetration of offshore funds to onshore market occurred in the actual operation. One of the reasons why offshore financial markets appear is to avoid domestic regulations, so the development of offshore financial markets will inevitably demand higher levels of financial regulations. Market risk prevention and regulatory issues are the most concerning parts in the financial sector, so is the case with the RMB offshore market. In addition to requiring financial institutions involved in offshore business to hold a rigorous and comprehensive internal control system, we demand their keeping in touch with the State Administration of Foreign Exchange in any situation.
