Accord paves way for Taiwan as Chinese yuan offshore hub
CNATAIPEI--The signing of a memorandum of understanding (MOU) on currency clearing between Taiwan and China will pave the way for Taiwan to become a Chinese yuan offshore trading center, according to the Mainland Affairs Council.
September 2, 2012, 12:05 am TWN
The council, Taiwan's top body in charge of cross strait relations, said Friday the MOU will allow more options for enterprises and individuals to conduct businesses or make financial investments to create a good foundation for Taiwan to serve as a Chinese yuan offshore trading center.
The currency clearing deal has long been anticipated by the local business sector, which has been calling for a currency settlement mechanism to make Chinese yuan denominated businesses, such as deposit-taking and fund-lending, available in Taiwan.
With the MOU in place, Taiwan aims to become the second Chinese yuan offshore trading center in the world after Hong Kong, while London and Singapore have also reiterated such an ambition.
Under the MOU, domestic banking units (DBUs) of local banks will be allowed to conduct Chinese yuan-denominated business. Currently, only offshore banking units of local banks are eligible to do such deals.
The agreement is scheduled to take effect 60 days after the signing.
The council said the Central Bank of the Republic of China (Taiwan) and the Financial Supervisory Commission are revising related rules in a bid to meet the needs for new financial deals across the Taiwan Strait once the currency settlement system kicks off.
Due to the currency clearing agreement, the local foreign exchange regulations will be applied to transactions of Chinese yuan in the banking sector's DBUs to help the local financial sector expand its service scope, the council said.
Meanwhile, Chang Pen-tsao, chairman of the General Chamber of Commerce of the ROC, said he expects the currency clearing deal with China may save almost NT$50 billion (US$1.67 billion) in foreign exchange losses and fee expenses a year for local enterprises.
At present, Taiwanese exporters have to sell their Chinese yuan for the U.S. dollar first and then exchange the greenback for the Taiwan dollar, Chang said.
With the MOU in place, the Chinese yuan can be exchanged directly for the Taiwan unit, which will cut costs for domestic companies, he added.