Chinese yuan-denominated deposits in Taiwan are expected to surpass 300 billion yuan (US$49.5 billion) by the end of this year, representing an annual increase of 64 percent, DBS Bank forecast yesterday.
The Singapore-based banking group said the forecast was based on yuan-denominated deposits in Taiwan having increased by about 14 billion yuan per month last year after Taipei lifted a ban on Chinese currency transactions in early February.
Many Taiwanese investors favor the yuan because they anticipate that it will depreciate further against the US dollar, the bank said.
Banks operating in Taiwan tend to offer higher interest rates on yuan deposits than on New Taiwan dollar accounts, which has lured customers to park their money in yuan accounts, DBS Bank said.
According to the central bank, yuan-denominated deposits in the banking system totaled 182.6 billion yuan as of the end of last year.
Yuan deposits in domestic banking units amounted to 138.22 billion yuan last year, and in offshore banking units 44.38 billion yuan, the central bank said.
With China’s economic growth remaining strong and its economy facing inflationary pressure, its central bank is likely to implement a rate-hike cycle sooner than other countries, according to DBS Bank.
It said higher interest rates on the yuan are expected to boost the value of the currency and spur more investors to put their funds into yuan-denominated assets.