Offshore Financial Markets VS Traditional Financial Markets

The traditional international financial market, also known as onshore financial markets, refers to the international financial markets, which is engaged in the currency of the country in which the market is located, governed by the policies and decrees of the local government.

This type of international financial market is generally developed from the regional financial market to the national financial market, then into the international financial market, such as London, New York, Frankfurt, Tokyo etc.


Offshore financial markets, refer to the markets where non-residents engage in one kind of currency transactions outside the border of this currency issuing country. Banks provide services including the absorption of non-residents funds and lending to non-residents, and they can also absorb the personal savings, and invest to other parts of the financial market.


As an important part of the international financial market, the development of offshore financial market makes it possible for a country to achieve the development of financial internationalization by setting up offshore financial markets, such as the opportunity to develop cross-border foreign currency financial markets. This also prompted some non-international financial center cities to grow rapidly into an international financial center.


Compared with the traditional financial market:

1. The traditional international financial market is a domestic market, regulated by the laws of the country, and operates in its own currency. The offshore financial market is a stateless market. The country and the currency do not restrict its issuer, but operates overseas currency.


2. The traditional international financial market is based on interest rates in the home country. Offshore banks are not constrained by the interest rate, which are based on the LIBOR (LIBOR) interest rate as benchmark, and do not have reserve requirements, and their operating costs are lower than that of domestic banks. The market is very free.


3. The traditional international financial markets have the tax system of the home country, while the offshore financial market is more favorable in tax revenue, which is the obvious advantages.


4. Traditional international financial markets are transactions between residents or non-residents. Offshore financial markets provide financing services for non-residents, and use non-residents deposits to provide foreign currency deposits to non-residents, and use foreign funds.


In summary, enterprises and individuals can achieve a variety of purposes through offshore financial markets, including registration of companies, seeking overseas listing and access to foreign investment treatment etc. Offshore finance is the result of global financial integration, the rise of offshore business has injected new vitality into the international financial market. Thus, offshore financial markets are of great significance, both economically and politically, to the nation



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2.Feng.W. On the legal supervision of offshore finance. East China University of politics and law, 2007.

3.Bei.D. Discussion on the characteristics of offshore financial market supervision. North China Finance, 2008 (1): 29-31.

4.Guoqiang. L. Analysis of the characteristics of contemporary international offshore financial markets. Foreign Trade and Economics University, 2007 (11): 64-67.
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