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June 23, 2017

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Taiwan's yuan bank deposits show growth in July

TAIPEI--Chinese yuan-denominated deposits in Taiwanese banks rose a mere 0.1 percent month-on-month at the end of July, revealing that investors are taking a cautious approach to China's foreign exchange policies, market analysts said.

The balance of yuan-denominated deposits in Taiwan's domestic banking units (DBUs) and offshore banking units (OBUs) as of the end

of July totaled 293.03 billion yuan (US$47.64 billion), up 2.88 billion yuan or 0.1 percent from a month earlier, Taiwan's central bank said.

The amount was shy of analysts' earlier forecasts of 300 billion yuan.

The growth of 0.1 percent month-on-month was the slowest increase since the DBUs belonging to Taiwanese banks were allowed to conduct yuan-denominated transactions involving deposits, lending and remittances in February 2013.

In August 2012 Taiwan and China signed an agreement to set up a yuan clearing mechanism in order to pave the way for local banks to engage in yuan-denominated transactions, amid warming cross strait business ties.

As of the end of July, yuan deposits at Taiwanese domestic banking units rose 902 million yuan or 0.38 percent from a month earlier to 240.99 billion yuan, while yuan deposits in offshore banking units fell 614 million yuan or 1.16 percent to 52.04 billion yuan, central bank statistics showed.

Analysts said although the yuan has appreciated against the U.S. dollar recently, investors appear to have limited interest in raising their Chinese currency holdings in Taiwan. They are still keeping a close eye on how far the Chinese authorities will allow the yuan to rise.

Although the growth of yuan deposits was slight in July, the central bank said, yuan deposits in Taiwanese banks are showing a trend of increasing, in contrast to declines in yuan deposits in Hong Kong banks.

Yuan deposits in Hong Kong banks fell from 959.9 billion yuan at the end of April to 955.8 billion yuan at the end of May. They then dropped even further to 925.9 billion at the end June, Taiwan's central bank said.

The central bank said Taiwan's yuan-denominated deposit business remains stable. As of the end of July, the outstanding yuan-denominated discounts and loans in Taiwan banks totaled 17.25 billion yuan, down 408 million yuan from the end of June. The central bank said the decline reflected less short-term yuan lending during the period.

Meanwhile, derivative transactions conducted by banks in Taiwan as the end of June totaled NT$54.32 trillion (US$1.81 trillion), down 7.39 percent from the end of March, the central bank said.

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