Taiwanese companies are increasingly making payments and collecting receipts through offshore Chinese yuan accounts, as Taiwan’s business ties with China deepen and China’s currency becomes more prominent in the global economy, according to a survey conducted recently by the Bank of America Merrill Lynch (BofA Merrill Lynch).
The finding is encouraging for financial institutions that aim to explore new business opportunities linked with the yuan, after the launch of offshore yuan business here earlier this year.
A total of 24 percent of treasurers in Taiwan are making payments and collecting receipts through an offshore yuan account, the survey showed after polling over 900 treasurers and treasury professionals, who were asked to identify business priorities and pinpoint market challenges as well as emerging trends.
Taiwan is moving closer to the goal of building an offshore yuan market after Hong Kong and Singapore, with the scale of yuan deposits in the local banking sector expanding rapidly towards 100 billion yuan (US$16.3 billion), the Singaporean DBS Bank remarked in a separate report released earlier this week.
The BofA Merrill Lynch survey said that Taiwan-based treasurers will further embrace the yuan for both payments and receivables purposes.
In addition to respondents who do not yet make payments and collect receipts through yuan accounts, 29 percent of Taiwanese treasurers indicated that they are interested in and exploring opening a yuan account.
“As treasury practices continue to evolve and business connections with China further solidify, Taiwan treasurers will increasingly embrace the yuan as a strategic currency for both payments and receipts,” said Kitty Yen (嚴若華), the US bank’s head of treasury sales for Taiwan.
It is noteworthy that more Taiwanese companies are making payments and collecting receipts through yuan accounts than their peers in other yuan hubs in the Asia-Pacific region, the bank said.
Twenty-three percent of companies in Hong Kong utilize the yuan and 18 percent in Singapore, the survey found. The use of the yuan by Taiwanese firms is also significantly higher than the regional average of 16 percent and ahead of peers in both China, at 20 percent, and Japan, at 17 percent, the survey showed.
Apart from the broad yuan usage, Taiwanese companies rank high as measured by cash visibility, account rationalization and technology adoption, it said.
Taiwanese treasurers pinpoint cash visibility as a primary focus in the coming 12 to 24 months, with 72 percent identifying this trend as a priority, compared with 60 percent in the Asia-Pacific, the survey indicated.
About 47 percent of Taiwan treasurers name rationalization of bank accounts a key priority, higher than the regional average of 38 percent.
As for technology adoption, 11 percent of respondents said they are utilizing cloud-based solutions for treasury management, compared with the regional average of less than 10 percent, the survey showed.