Yuan deposits at Taiwanese banks fell 2.88 percent to 326.94 billion yuan (US$51.29 billion) last month from July, as the Chinese currency’s widening volatility fueled unease among corporate and individual clients, the central bank said yesterday.
It was the second consecutive month of decline and the fastest pace of retreat since Taiwan allowed yuan deposits in February last year, the central bank said.
“Taiwanese companies and individuals turned more cautious about yuan holdings after seeing wide swings in the wake of the fixing reform,” a central bank official said.
The People’s Bank of China on Aug. 11 cut the official guidance rate for the yuan by 1.9 percent to 6.2298 per US dollar, from 6.1162 the previous day.
Some pundits saw the change as an effort by China to boost its exports amid a global economic slowdown, while others saw it as a move to push for the yuan’s inclusion in the IMF’s reserve currency basket.
Several research institutes have trimmed their forecasts of the yuan against the US dollar this year, but stand pat on expectations about its appreciation in the long run.
In Taiwan, yuan deposits plunged 7.3 percent monthly to 49.79 billion yuan last month at local lenders’ offshore banking units (OBUs) and shrank 2 percent to 277.15 billion yuan at their domestic banking units (DBUs), the central bank said. The former operations serve mainly corporate customers and the latter service individual clients.
The fixing change makes the yuan more in tandem with market movements, posing both upside and downside investment risks like all other currencies, rather than moving in one direction, the central bank official said.
Growing volatility did not weaken the yuan as a payment tool among Taiwanese firms or individuals.
Remittance at DBUs soared 53.63 percent last month to 235.41 billion yuan and rose 53.37 percent to 171.89 billion yuan at OBUs, the central bank said.
“Local companies have grown increasingly comfortable with doing business in yuan, especially technology companies with operations in China,” the bank official said.
Yuan-based negotiable certificates of deposit (NCD) reached 2.85 billion yuan at DBUs in July, the first official data available after the central bank allowed lenders to issue the certificates denominated in foreign currencies.
The deregulation is aimed at boosting yuan deposits and foreign currency-related investments in the local market as Taiwan seeks to catch up with Hong Kong in its bid to become a regional financial hub.
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