Lawmakers passed an amendment to the Statute Governing the Relations Between the Peoples of the Taiwan Area and the Mainland Area (兩岸人民關係條例) yesterday to legalize direct currency exchange between the New Taiwan dollar and the yuan in Taiwan.
The amendment, proposed by Chinese Nationalist Party (KMT) legislators, authorizes the Financial Supervisory Commission (FSC) to regulate the amount of yuan people are allowed to carry into Taiwan and provides for the direct exchange between NT dollars and the yuan once a bilateral currency clearance and settlement mechanism between Taipei and Beijing is established.
The amendment will require incoming travelers to declare to customs upon arrival if they are carrying “an excessive amount of yuan.”
Any yuan over the legal limit would have to be sealed and handed over to customs officials to hold until the traveler leaves the country. Customs officials would be authorized to confiscate the excess yuan if travelers have failed to report it.
However, yesterday’s amendment does not specify how much yuan an individual should be allowed to bring into the country.
The Ministry of Finance has allowed Taiwanese to bring up to 6,000 yuan (US$860) into the country since March 1, 2004, although direct NT dollar-to-yuan exchanges are prohibited in local banks or financial institutions except for designated locations in Kinmen.
Travelers who wish to change their yuan into NT dollars currently have to go through a two-step process by first converting their yuan into US dollars or any other foreign currency recognized in Taiwan or a third country. They can then exchange the foreign currency for NT dollars.
Deputy central bank Governor George Chou (周阿定) had proposed that Taiwanese and Chinese travelers be allowed to carry less than 20,000 yuan to exchange for NT dollars at a government-designated financial institution.
Under his proposal, Chinese visitors would be able to convert any unused NT dollars back into yuan, but such privileges would not be extended to Taiwanese, who would have to first convert their NT dollars into a third country’s currency and then into yuan.
Under the amendment passed yesterday, direct currency exchange between yuan and NT dollars will be allowed on a trial basis at financial institutions designated by the central bank and the FSC until a currency clearance and settlement mechanism is established.
Travelers who violate the new regulation will have their Chinese currency confiscated. Local financial institutions that violate the regulation will be subject to fines between NT$300,000 (US$9,900) and NT$1.5 million.
KMT Legislator Lu Shiow-yen (盧秀燕), one of the sponsors of the amendment, said the proposal was initiated to complement the KMT administration’s policies.
“Now the 4 million Taiwanese people who visit China annually can exchange their yuan directly instead of turning to the black market,” she said after the amendment was passed.
Lu urged the FSC and the central bank to map out detailed regulations for currency exchange and designate “as many exchange locations as possible.”
She also said she hoped people would be allowed to exchange at least 20,000 yuan.
Banking regulators, however, shied away yesterday from specifics on NT dollar-yuan forex exchanges after the amendment was passed.
Both the central bank and the FSC said they needed more time to review the issue, but that new regulations would be ready before the expansion of Chinese tourist quotas takes place, which is expected to be early next month.
An unnamed central bank official dismissed media speculation that currency exchanges would initially be limited to the purchase of NT dollars by Chinese tourists.
“It is premature to give definite remarks at this juncture,” the official said. “The bank will have to consult with other government agencies and academics before reaching a conclusion.”
FSC Vice Chairwoman Susan Chang (張秀蓮) said the commission has no objection to Taiwanese buying Chinese yuan at local financial institutions.
HSBC also said it was willing to sell the yuan in its possession.
The supply of yuan constitutes the biggest hurdle to two-way currency trade.
ADDITIONAL REPORTING BY CRYSTAL HSU AND JOYCE HUANG
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