Taipei, Dec. 12, 2012 (CENS)--People’s Bank of China announced yesterday (Dec. 11) designation of the Taipei branch of the Bank of China (BOC) as the renminbi clearance bank in Taiwan, thereby kicking off the cross-Taiwan Strait currency clearance mechanism. Li Lihui, president of BOC, pointed out yesterday that the Taipei branch of the BOC has made full preparation for the task, paving the way for Taiwanese designated banking units (DBUs) to inaugurate renminbi-related businesses by the end of this year.
With the launch of the cross-Strait currency clearance mechanism, the Financial Supervisory Commission (FSC) is expected to issue decree today, at the earliest, permitting DBUs to engage in renminbi-related businesses, including deposit, remittance, and loan.
Li Lihui noted that the mode of cross-Strait currency clearance may be different from the mode of currency clearance between mainland China and Hong Kong. He believed that People’s Bank of China will make proper arrangement on the basis of the actual need of cross-Strait currency clearance and provide sufficient renminbi-clearance quota to meet the demand of cross-Strait trade.
Li Lihui remarked that Bank of Taiwan and BOC have been authorized by the central banks of both sides to provide high-quality service for cross-Strait financial exchanges and currency clearance. In view of the full preparation of the Taipei branch of BOC, it is possible for the launch of cross-Strait currency clearance mechanism by the end of this year, although it is only two weeks away, according to Li.
For the internationalization of renminbi, said Li, cross-border use of the currency must reach a certain scale. Cross-Strait currency clearance will greatly enhance the cross-border use of renminbi, as cross-Strait trade hit US$160 billion annually, with Taiwan enjoying some US$90 billion trade surplus. Therefore, cross-Strait currency clearance will not only benefit Taiwan but also contribute to the internationalization of renminbi. The internationalization of renminbi will coincide with the mainland’s effort to liberalize exchange rate and interest rate, as well as free conversion of capital account, a development which will benefit both the mainland and Taiwan, said Li.
Meanwhile, Liu Teng-cheng, chairman of Taiwan Financial Holding, parent group of Bank of Taiwan, pointed out yesterday that there is a huge potential for the development of renminbi market in Taiwan.
In Hong Kong, which opened renminbi business seven to eight years ago, the scale of renminbi deposits now account for one tenth of the total deposits. Liu Teng-cheng predicted that the scale of renminbi deposits will grow at a even faster speed, amounting to one tenth of the total deposits in a few years, equivalent to 600 billion yuan (around NT$3 trillion).
An insider said that initially renminbi-related businesses will focus on cross-border trade settlement, deposit, currency conversion, remittance, and corporate loan. In the long run, the scope will be extended to financial card, credit card, individual loans, and financial derivatives.
