Central bank Deputy Governor Yang Chin-lung (楊金龍) yesterday called for the establishment of a cross-strait currency swap deal to build up a liquidity safety net for Chinese yuan-based business in Taiwan.
The central bank is also considering deepening Taiwan’s yuan market by unveiling a pricing mechanism in both currency and interest rates for offshore yuan business, Yang added.
“Taiwan is now the place to meet the needs of many markets for yuan funding,” Yang said during a speech in a forum held by the Euromoney magazine.
In terms of fund uses, Taiwan’s financial institutions conduct yuan transactions such as lending and deposits with financial institutions in many countries, including China, Japan, South Korea, Singapore, France, Thailand, Germany, Italy, Australia, Luxemburg and the United Arab Emirates, Yang said.
In addition, yuan funds in Taiwanese banks come from deposits by individuals and corporations locally and abroad, and from financial institutions outside Taiwan, mainly based in Hong Kong.
Yang’s remarks showed that yuan-based businesses in these two major hubs have become closely linked and further indicated the central bank has been preparing to negotiate with China about the establishment of a cross-strait currency swap deal as a prerequisite to creating a second offshore yuan center.
To further develop the nation as an offshore yuan hub, Yang said the financial industry would play an important role by boosting yuan deposits and lending to business, as engaging in other financial activities.
The industry can also grow the market by introducing more financial products using the yuan, such as mutual funds and insurance policies, he added.
Early last month, more than 100 billion yuan (US$16.41 billion) were deposited in domestic banking units and overseas banking units, up from 98.66 billion recorded at the end of September, data from the central bank showed.