"I did not feel that Liu was making an announcement when he talked about the issue, neither did I think he was sending up a trial balloon. The question was brought up following some other questions regarding cross-strait issues, and Liu’s attitudes on these questions had been the same — he is open to discussion and has no time frame,” Chen said, referring to other questions asked during the interview on issues about a cross-strait financial memorandum of understanding (MOU) and economic cooperation framework agreement, among others.
Jack Huang (黃蔭基), head of research at SinoPac Financial Holdings Co (永豐金控), said yesterday he didn’t think Liu had raised the yuan issue during the interview on purpose, although he gave his support to the idea because companies and people would have easier access to the Chinese currency and the central bank would increase its income from interest.
Norman Yin (殷乃平), a money and banking professor at National Chengchih University, said he believed Liu’s proposal did not come out of nowhere.
Liu might have meant that Taiwan and China would establish a foreign exchange (FX) swap, an agreement that China has signed with seven or eight countries, like Russia and South Korea, Yin said.
FX swap is a mechanism whereby two parties exchange agreed-upon amounts of two currencies as a spot transaction, simultaneously agreeing to unwind the exchange at future dates.
Yin said the FX swap was already included in the cross-strait negotiation on signing the financial MOU, the details of which are still unclear.
He said Taiwan and China would benefit from the FX swap as trade and investment could be conducted without converting their currencies to US dollars.
“The FX swap would help businesspeople save on conversion costs. With the mechanism in place, we also won’t see a surge in the nation’s foreign exchange holdings in US dollars when cross-strait trade picks up. The US dollar’s exchange rate is not that stable, and more and more people are losing their confidence in the greenback,” Yin said.
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