The central bank said yesterday that it is considering developing Taiwan into an offshore trading center for the Chinese yuan, given the increasing trade between Taiwan and China.
Currently, Hong Kong is the only offshore trading hub of the Chinese yuan, though Singapore has been considering filing an application with China to operate an offshore yuan trading center there.
“Developing an offshore yuan center in Taiwan can be our goal, one that needs negotiation [with Beijing] to be realized,” the central bank said in a statement released yesterday.
The comments came after local bankers, including Fubon Financial Holding Co (富邦金控) president Victor Kung (龔天行), last week called on the government to look into the possibility of building an offshore center for yuan trade in Taiwan.
Also, the central bank said it created a special taskforce for new talks with the People’s Bank of China in the second half of the year, charged with building a cross-strait currency settlement mechanism.
The recent debt crisis in the US and the eurozone gave rise to the theory that the Chinese yuan should internationalize to become another global reserve currency aside from the US dollar.
“The internationalization of the yuan would be key to leading the shift of global financial gravity to the East,” Kong said at a seminar on Friday.
That would give Taiwan a better chance at becoming an offshore yuan center. The nation’s large amount of trade and investment with China might help boost the yuan’s liquidity and lead to Taiwan playing an important role in the yuan’s internationalization, Kong added.
Taiwan’s trade to China totaled US$41 billion last year, the central bank’s statement said.
However, even if Taiwan becomes an offshore yuan center, it is still difficult to challenge Hong Kong’s supremacy in this area, Kong said, adding that Hong Kong remained China’s only offshore center to trade the yuan thus far, with more than 90 billion yuan in offshore deposits.
Financial Supervisory Commission Vice Chairwoman Lee Jih-chu (李紀珠) said at the same conference that Taiwan has the capability to help accelerate the internationalization of the yuan, especially on the quotation, settlement and asset allocation fronts.
Currently, the bank and the commission have allowed offshore banking units and overseas branches of Taiwanese banks to conduct business in yuan, in response to the demand on yuan’s trade settlement from Taiwanese corporations in China.
The bank said it had also given approval to 223 financial institutions and 194 foreign currency exchange agencies to conduct yuan exchanges, in an effort to address the anticipated increase in demand for currency exchange services.