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May 27, 2017

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Central bank hopes to add China yuan to forex reserves: Perng

Perng Fai-nan, governor of Taiwan's central bank, yesterday expressed the hope to add the renminbi to the island's foreign exchange reserves.

Perng made the remarks during his report to the Finance Committee of the Legislative Yuan.

During his report, Perng said it was his hope that, within a year after the signing of a cross-strait currency swap mechanism, the Chinese yuan, also known as the renminbi, would be included in the basket of currencies that make up Taiwan's foreign exchange reserves.

The currency swap is an extension of a memorandum of understanding (MOU) recently signed by both sides of the Strait to set up a currency clearance system.

During the Q&A session, legislators showed Perng a survey conducted by Cathay Financial Holding, saying that of 17,000 customers with savings accounts in the bank, over 50 percent want savings denominated in the renminbi and want renminbi to account for 5 to 20 percent of total savings. Based on Taiwan's total savings of NT$23 trillion, NT$2 trillion worth of renminbi savings is in demand.

Responding to lawmakers, Perng said the government will in November at the earliest allow banks to offer renminbi-based savings, whose rates however will not exceed the 3 percent that is currently offered by banks in China.

"There will be a difference in rates offered by banks in China and banks outside China," Perng said. "The 3-percent-plus rate offered by Chinese domestic banks will not be applicable in Taiwan, where renminbi-based savings rates are likely to be less than two percent as what's done in Hong Kong."

Comments on QE3

Also during the Q&A session, Perng was asked about his view on the third round of quantitative easing measures launched by the U.S. Federal Reserve.

"When large countries loosen their monetary policies, they should take into consideration concerns from small countries over a liquidity overflow," he said.

Meanwhile, lawmakers from both parties implored Perng to stay as the governor of the Central Bank of the Republic of China (Taiwan). His term expires in February next year.

Some lawmakers even asked Perng to head the Cabinet to salvage Taiwan's poor economy.

To this, Perng only repeated his vow that the head of the central bank would be the last civil service job of his life.

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