Taiwan will be in a better position to become a regional financial hub if it allows local lenders to operate yuan businesses that are currently limited to their offshore banking units, foreign financial institutions said.
“About one-third of the currency flow presently routed through Hong Kong will move back to Taiwan, suggesting ample business potential for its financial sector,” Hong Kong-based ANZ economist Raymond Yeung (楊宇霆) told a media briefing in Taipei yesterday.
Yeung put the prospective business volume at 100 billion yuan (US$15.84 billion) a year, judging from yuan settlement demand in Hong Kong that is linked to Taiwanese manufacturers.
Currently, Taiwanese firms with business operations in China have to convert their funds into the greenback before evaluating their worth in yuan and vice versa, because of the lack of a cross-strait currency clearing agreement.
The central bank said last week that it aimed to sign a currency clearing pact with China by the end of June, but that it has no immediate plan to establish a formal currency swap arrangement.
“The key [to the yuan market] lies in the extension [of yuan business license] to domestic banking units,” Yeung said.
Cross-border currency settlement amounts to 1.5 trillion yuan a year in Hong Kong with up to 30 percent of that amount linked to Taiwanese manufacturers, Yeung said.
European Chamber of Commerce Taipei vice chairman Olivier Rousselet voiced a similar view recently, saying the Financial Supervisory Commission will have to consider the opening to lift Taiwan’s standing in the regional financial market.
“The easing of offshore yuan business is good, but extending the license to domestic banking units is necessary,” if the government is serious about benefiting from the yuan’s internationalization, Rousselet said.
The commission is reportedly receptive to the proposed liberalization and would ease rules later this year, after a meeting with heads of foreign financial institutions early this month.
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