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Economic Daily News: New cross-strait currency exchange system

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littlekracker



Economic Daily News: New cross-strait currency exchange system
2010/07/22 12:40:59
The Central Bank of the Republic of China (Taiwan) on Wednesday gave its approval for the Bank of Taiwan and Mega International Commercial Bank to provide Chinese yuan cash settlement services to Taiwan's financial institutions after Taiwan, Hong Kong and China announced the establishment of a new currency exchange mechanism last week.

The two Taiwanese banks will start providing the services after signing an agreement with the Hong Kong branch of the Beijing-based Bank of China, which has been designated by the People's Bank of China, China's central bank, to offer the cash settlement services to Taiwan banks.

Local banks will be able to obtain yuan in cash from the designated settlement bank in Hong Kong, rather than through foreign banks, and a stable supply of the notes will be ensured.

However, Taiwan's central bank is still not allowed to deal with the People's Bank of China directly because of technical problems and political factors.

After Taiwan eased restrictions on direct transactions involving Chinese currency in 2008, local banks have amassed 8.1 billion yuan while selling 10.9 billion yuan.

With rising demand for the Chinese yuan in expectation of its appreciation, there is a big shortage of yuan notes in Taiwan.

The cross-strait currency settlement mechanism is expected to only meet demand for a small amount of yuan, however, not to meet the needs of Taiwanese businesses that have set up footholds in China for yuan depositing and remittance services or to establish a yuan settlement platform between them and Chinese enterprises.

There is a need for a more easily accessed cross-strait currency settlement system between Taiwan's central bank and the People's Bank of China. (Abstract of Economic Daily News editorial, July 22, 2010) (By Y.L. Kao) ENDITEM/bc

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