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Yuan clearing mechanism likely to begin after CPC congress

Yuan clearing mechanism likely to begin after CPC congress

Taipei, Oct. 29 (CNA) A yuan clearing mechanism between Taiwan and China will likely become operational after Beijing appoints its clearing bank, which may take place after the 18th national congress of the Communist Party of China (CPC), Taiwan's central bank governor Perng Fai-nan said Monday. Speaking at a Legislature's Finance Committee hearing, Perng said the People's Bank of China in Beijing will likely announce which bank it will select to clear transactions in yuan in Taiwan after the CPC's Nov. 8 national congress.
"China is choosing from two of its bank branches in Taiwan to be the yuan clearing bank. But the process is delayed due to the important meeting next month," Perng said. Two Chinese banks -- Bank of China and Bank of Communications -- have each set up a branch in Taiwan. Perng's remarks were a response to a question posed by Kuomintang Legislator Lai Shyh-bao, who wondered why China has not yet appointed its clearing bank after Taiwan appointed Bank of Taiwan's Shanghai branch on Sept. 17 as the clearing bank to handle transactions in Taiwan dollars in China.
The memorandum of understanding on currency clearing signed between the two sides on Aug. 31 specifies that each side will pick a clearing bank to handle direct yuan conversions within sixty days of the pact being signed. Under the deal, both sides can freely conduct currency exchanges between the Chinese yuan and the Taiwan dollar, which will cut foreign exchange costs by avoiding the default exchange process of first having to convert the currencies into U.S. dollars. The deal will also allow local banks to accept yuan deposits and give out yuan loans, according to the central bank. Perng told lawmakers that he estimated the mechanism will become operational by Dec. 1, pending China's final decision on which bank it will select to clear transactions. According to industry sources, it is likely that Bank of China will be selected as the clearing bank in Taiwan by the Chinese monetary authority.
China's new leaders will be unveiled in the CPC's 18th national congress in Beijing. (By Kao Chao-fen and Ann Chen)