Chinese yuan banking service begins: official

The bank said it had previously inked an agreement with its Chinese counterpart, the Bank of China, to build a yuan-clearing mechanism.

Due to the agreement, yuan-clearance services will be able to be provided by Taiwan's local and international banks, according to the central bank. The bank said 46 banks within the nation have been approved to provide the service.

Forecast of Economics Think Tank

A private economics think tank, Yuanta-Polaris Research Institute (元大寶華綜合經濟研究院), said the yuan-clearing mechanism between Taiwan and the mainland will do much to foster financial ties.

The institute forecast that the monetary clearance mechanism will increase Taiwan's global economic competitiveness. The think tank said Taiwan may be able to work more closely with Asia's future financial service center in the mainland through the agreement.

Taiwan will need to work toward becoming an international financial service center. For this to take place, the nation must establish sufficient liquid capital and broaden the diversity of its financial and banking services, the research institute said.

It added that with increasing trade and investment opportunities in the mainland, combined with Taiwan's current trade surplus with its partner across the Strait, the nation stands to benefit from the increasing amount of liquid capital created from an influx of yuan.

The institute forecast the total amount of Chinese currency flowing into Taiwan may exceed 100 billion yuan within a year.

Regarding how to diversify Taiwan's banking services in terms of the yuan, the think tank suggested that Taiwan's government should work in-line with the mainland. It also said that the government should learn from Hong Kong, thereby boosting the prosperity of Taiwan's financial institutions.

The think tank said that Taiwan's financial services could be better developed by building on the nation's current trade resources with the mainland. The think tank at the same time said the government has to be cautious in terms of stabilizing the New Taiwan dollar's value, so as to reduce the negative impact on the local currency.

Diversification Services

Chinatrust Commercial Bank (中國信託商業銀行) said banking clients who already have an international bank account would be able to deposit Chinese yuan at its branches as well as through online banking.

Taishin International Bank (台新銀行) said Taiwan enterprises would be able to apply for cross-strait yuan transactions for imports and exports. Local enterprises that invest in the mainland can also start sending and receiving letters of credits from the mainland via Taiwan banks in Chinese yuan.

Taipei Fubon Commercial Bank (台北富邦銀行) said that local investors could start looking at the investment potential of Exchange Traded Funds (ETF) in the mainland as well as “dim sum bonds”; bonds issued outside of China but denominated in the Chinese Yuan. Fubon said the agreement frees investors from having to conduct transactions through the U.S. dollar

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