Taiwan well placed to become offshore yuan trading hub: FSC

Taipei, Dec. 30 (CNA) Tseng Ming-chung, chairman of the Financial Supervisory Commission (FSC), said Wednesday that Taiwan is well positioned to function as an offshore trading hub for the Chinese yuan.

At a forum in Taipei on the internationalization of the yuan, Tseng said Taiwan is sitting on abundant yuan holdings, particularly in its banking system, which gives the country an advantage to become an offshore yuan trading hub.

As of the end of November, yuan deposits in Taiwanese banks totaled 317.86 billion yuan (US$48.98 billion), down 2.4 billion yuan from a month earlier, according to statistics from the local central bank. The bank said the decline, the fifth consecutive monthly drop, reflected the weakness of the yuan against the U.S. dollar.

However, Tseng said that despite the decrease in bank deposits, yuan supplies in Taiwan remained high, as trade across the Taiwan Strait was still robust. Amid warming cross-strait business ties, Tseng said, Taiwan enjoys an annual trade surplus of US$50 billion to US$60 billion with China.

If that trade surplus is converted from U.S. dollars into the yuan via a currency settlement mechanism, Taiwan's yuan holdings will increase further, he said.

Taiwan signed an agreement with China in August 2012 to set up a yuan clearing mechanism, while the local central bank in February 2013 lifted a ban to allow banks in Taiwan to conduct yuan-denominated transactions, including deposits, lending and remittances.

Tseng said Taiwan has a strong industrial base and a solid capital market, which has encouraged many companies to issue yuan denominated bonds. With an increasing number of Taiwanese firms investing overseas, in particular in China, they have found good avenues for use of their yuan holdings, he said.

Tseng said he is confident that Taiwan will play a major role in yuan trading, as it is now the biggest yuan exchange rate futures market, having overtaken Hong Kong, Singapore and Chicago.

Taiwan is hoping to work with the United Kingdom to develop yuan-denominated products, according to Tseng.

He said such cooperation is likely to create a win-win situation, as the U.K. is good at launching yuan products, while Taiwan has loads of funds. (By Tsai Yi-chu and Frances Huang)

Updated : 2021-04-17 20:53 GMT+08:00