Taiwan indirectly recognizes China's renminbi currency

After refusing to recognize China's state currency for over four decades, Central Bank of China Governor Perng Fai-nan (彭淮南) unofficially reversed the government's China currency policy by declaring forgery of the monetary instrument illegal.

Perng made the remarks during a legislative interpellation session yesterday in Taipei.

Perng's declaration that counterfeiting the Chinese yuan in Taiwan is against the law offers the Chinese currency -- the renminbi -- its first recognition by Taiwanese officials in over four decades.

Perng said that since China is internationally recognized as a country, its currency should be regarded as the legal tender of that nation, the report said.

Counterfeiting Taiwan dollars in the People's Republic of China is also a criminal offence punishable by law.

While the central bank governor recognized the existence of the Chinese renminbi as a legitimate currency, he suggested Taiwan should conduct trade with the cross-strait neighbor in US dollars.

Taiwan will soon face the cross-strait trade currency question as the government has recently sped up plans to open the small three links (小三通) with China -- including trade, transportation and communications.

Chinese law already requires that cross-strait trade be conducted in US dollars only and Taiwan is also determined to maintain the policy according to Perng.

Taiwan and China officially do not recognize each other's status and have banned circulation of the other country's currency.

Currency exchange, though, is common among cross-border travelers and businesses.

When asked about the possibility of a "Greater China" currency, Perng said the idea could be a long-term goal, but that not all Asian countries are democracies, so "How can you have a currency alliance without a security alliance?"