Taiwan may be able to establish RQFII (renminbi qualified foreign institutional investor) mechanism, similar to Hong Kong, thereby facilitating the flowing back of renminbi to mainland China, which is critical for Taiwan to develop into a renminbi offshore center.
The possibility for Taiwan to secure the RQFII status was revealed by Xing Yujing, secretary general of the monetary policy committee of People’s Bank of China (PBC), during a cross-Taiwan Strait financial academic seminar in Taipei yesterday (Nov. 21).
The scale of RQFII will hinge on market demand and negotiation between regulators of Taiwan and mainland China. The Central Bank of China (CBC) aims to secure a quota similar to the scale of Hong Kong, which stands at 270 billion yuan now.
Xing expressed that regarding the initiation of RQFII mechanism in Taiwan, PBC is willing to respond to market demand, under the principle of adequate risk management.
Xing noted that in the future renminbi in Taiwan can flow back to mainland China via four channels. First is direct payment of goods or services imported from China or returns of Chinese investments in Taiwan. Second, Taiwanese enterprises can borrow renminbi in Taiwan for direct investments in the mainland. Third, Taiwan can take part in interbank bond market in the mainland. Forth, Taiwan can establish RQFII mechanism, similar to Hong Kong.
Xing noted that the interbank bond market in mainland China now allows participation of three kinds of institutions, including foreign central banks, renminbi clearance banks in Hong Kong and Macao, and offshore banks. Some 100 offshore institutions have invested in the market now. Taiwanese banks can also take part in the market by attending cross-border renminbi trade settlement mechanism or opening accounts at renminbi clearance banks in Hong Kong or Macao or Chinese agency banks.
