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Yuan exchanges could solve legal problems: official

"With the regulation in place, the police and investigation agencies will step up efforts to clamp down on unlawful transactions."

George Chou, director-general of the central bank's currency department

The government's decision to allow Chinese yuan to be exchanged for New Taiwan dollars on Kinmen and Matsu, as part of a trial run starting on Monday, could finally resolve the long-standing problem of the Chinese currency being illegally circulated on these two outlying islets, George Chou (周阿定), director-general of the central bank's currency department, said yesterday.

"With the regulation in place, the police and investigation agencies will step up efforts to clamp down on unlawful transactions. Illegally traded yuan will be confiscated and transferred to customs," Chou said.

He made the remarks at a joint press conference with Financial Supervisory Commission officials, after Premier Frank Hsieh (謝長廷) announced the new measure in a Cabinet meeting yesterday morning.

In the initial stage, only the financial institutions that operate branches in Kinmen or Matsu, or the companies commissioned by these institutions, such as travel agencies or hotels, are allowed to change Chinese yuan into NT dollars, Chou said.

The central bank has authorized the Bank of Taiwan's (台灣銀行) three branches, the Lank Bank of Taiwan's (土地銀行) two branches and the Kinmen County Credit Cooperative (金門縣信合社) to conduct the yuan business, he added.

They have been granted autonomy to decide the exchange rate between the yuan and NT dollar.

Chou said that if the trial run is effective -- although no timetable has been set -- the government will consider discussing an agreement with Beijing on a settlement agreement to further open up the yuan-NT exchange market.

"We hope it will happen soon," Chou said.

Residents from Taiwan and China who are qualified to travel across the Taiwan Strait via the "small three links" are entitled to exchange a maximum of 20,000 yuan for NT dollars on each entry or exit. In the mean time, regulations have also been loosened to allow travelers entering or leaving Kinmen or Matsu to carry a maximum of 20,000 yuan, up from 6,000 yuan.

FSC chairman Chairman Kong Jaw-sheng (龔照勝) said the yuan trading should be furthered opened up in Taiwan proper.

"We should not avoid it and must be brave in facing it," he said in response to a question from lawmakers in the legislature yesterday morning.

Separately, Hsieh also announced that commodity taxes on gasoline, diesel and fuel oil will be cut by 25 percent on Saturday for a period of three months.

According to an estimate by the Ministry of Economic Affairs, the cut will deprive the state coffers of NT$6 billion (US$180.3 million) in tax revenue.

In response, the nation's second-largest oil refiner, Formosa Petrochemical Corp (台塑石化), immediately decided to slash its wholesale gasoline prices by NT$1.7 per liter.

The treasury faces further income losses after the legislature yesterday passed an amendment in its first reading to exempt taxi drivers from license taxes and fuel charges.

If the regulation is passed after three readings, it would deprive the state coffers of around NT$1.3 billion and benefit nearly 100,000 drivers nationwide, according to an estimate by the Ministry of Transportation and Communications.
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