The central bank has appointed Bank of China's Taipei branch to clear yuan transactions in Taiwan, in the latest step to strengthen economic ties between the mainland and the island.
The People's Bank of China signed a clearing agreement with the BOC branch yesterday, under which Taiwan residents would be allowed to deal in yuan-denominated assets such as deposits, loans and yuan investments.
Taiwan's central bank said in a statement that yuan businesses on the island would begin as early as the Lunar New Year.
Monetary authorities of the mainland and Taiwan signed a landmark pact on currency clearing on August 31 last year.
Under the pact, each side would name a clearing bank to handle direct conversions between the yuan and the Taiwan dollar.
Last year, Taipei appointed Bank of Taiwan's Shanghai branch as a clearing bank for Taiwan dollar transactions on the mainland.
The clearing agreement was seen as an initial step to acknowledge Taiwan's role in the drive to internationalise the yuan.