Taiwan sees record yuan deposits on growing trade

PUBLISHED : Saturday, 06 October, 2012, 12:00am
UPDATED : Saturday, 06 October, 2012, 2:53am

Taiwan's central bank had accumulated a record 17.54 billion yuan (HK$21.5 billion) by the end of August after a year of steady growth, largely because of business from offshore banks.

More inflows of the currency are expected as exchange gets easier.

The mainland is Taiwan's largest trading partner but until recently, trade was limited by icy political relations. Yuan transactions were seldom made just five years ago.

Taiwan is the latest market jockeying with Hong Kong, London and Singapore to be the main offshore yuan trade settlement centre.

Yuan exchanges have increased since the mainland and Taiwan began doing brisk, open trade after the island's leader Ma Ying-jeou took office in 2008 with a softer approach to cross-strait relations.

Taiwan has also begun allowing the mainland to buy shares in Taiwanese-listed firms and invest directly in more than 400 sectors.

The accumulated yuan came from transactions by offshore bank units, a central bank official said. Those units handle cross-strait trade in the absence of free currency exchanges in Taiwan.

But exchanges are set to get easier. In August, Beijing and Taipei signed an agreement allowing each to set up a clearing bank for yuan-Taiwan dollar trades, a scheme similar to that between the mainland and Hong Kong.

"With Taiwan to be another offshore centre for yuan, it follows that the central bank builds a store of reserves and liquidity in [yuan]," said Patrick Bennett, a foreign exchange strategist with the Canadian Imperial Bank of Commerce in Hong Kong.