Perng Fai-nan, governor of the Central Bank of China (CBC), announced on August 31 that Taiwan and China have signed the memorandum of understanding for cross-Taiwan Strait currency clearance and will select the clearance bank in the next step, with the goal of allowing domestic banks to inaugurate renminbi-related businesses in 60 days. That is to say that domestic banks may be able to launch renminbi deposits or remittance by the end of October.
Subsequently, the Financial Supervisory Commission (FSC) will permit domestic banks to undertake renminbi deposit, loan, and remittance businesses; it may further open up such businesses as renminbi funds, bonds, offshore structured ones in the next stage.
Perng noted that major contents of “memorandum of understanding for cross-Strait currency clearance” is the establishment of the framework of cross-Strait currency clearance mechanism, under which both parties will designate a currency clearance institution to provide the service of currency settlement and clearance for the other party, as well as subsequent management.
Taiwan will be become the third offshore place with a renminbi clearance institution, following Hong Kong and Macao. In the future, domestic
banks will be able to open renminbi deposit, remittance, and conversion businesses and exporters and importers can directly carry out cross-Strait trade settlement in Taiwan, helping Taiwan to develop into the world’s second offshore renminbi center.
Perng noted that the establishment of cross-Strait currency clearance mechanism will generate three major benefits. First is the use of renminbi for cross-Strait economic and trade activities, increasing the flexibility of firms in fund maneuvering; second is the issuance of renminbi-denominated bonds and the provision of renminbi-denominated financial products; and third is attraction of foreign financial institutions to invest in renminbi-denominated products in Taiwan, thereby helping Taiwan develop into an offshore renminbi market.
Perng noted that the CBC still needs to consult with its mainland Chinese counterpart concerning the restrictions on deposit, withdrawal, or remittance of renminbi bonds. In Hong Kong, every one person can only open one renminbi account, with the daily deposit ceiling set at 20,000 yuan. A client can remit up to 80,000 yaun to the account with the same name in mainland China daily.
Industrial insiders predicted that the renminbi clearance bank in Taiwan may be served by the Taipei branch of the Bank of China, while the NT-dollar clearance bank in mainland China may be served by the Shanghai branch of the Bank of Taiwan.
Perng noted that both sides must complete the revision of related laws and regulations, as well as the designation of clearance bank, within 60 days after the signing of the MOU.
Source:
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