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CBC urges allowing NT dollar-yuan currency exchange

Governor says move is practical and timing is ripe, adds Taiwan inflation low and stable

CBC urges allowing NT dollar-yuan currency exchange

Taiwan's top monetary official yesterday urged the government to lift the ban on exchanging the Chinese yuan for Taiwan dollars, saying the practice would not negatively impact the country's economic growth.
Central Bank of China Governor Perng Fai-nan told the Legislature's Finance Committee it would take his agency a week to be ready to conduct the new business once the government gives its go-ahead.
"The timing for the currency exchange is ripe," Perng said. "We have organized several seminars to teach bank staffers how to detect counterfeit Chinese currency. The issue will not pose any difficulty."
Currently the service is limited to banking offices in the outlying islands of Kinmen and Matsu as a part of the mini-links policy.
Perng said it is desirable and practical to extend the service to Taiwan proper where people may find themselves with yuan after traveling to China but are not allowed to exchange it into local currency.
"The restriction is unreasonable as it helps encourage people to keep the yuan, which may replace new Taiwan dollars as the medium of exchange," Perng said.
The CBC chief added he believed the suggested opening will not in any way harm the island's economy.
Perng, however, said the Mainland Affirs Council will have the final say on the matter and he would respect the agency's decision.
Perng also said yesterday that Taiwan's inflation is "low and stable" and he'll adjust interest rates to an "appropriate level."
"The core consumer price index for the first 11 months is only 0.52 percent, the lowest level in almost 10 years," he said. "We expect core CPI to be lower than 0.68 percent" forecast by the government's statistics agency.
Perng also said the central bank will act when necessary to "maintain order" in the currency market.
Taiwan's Central Bank of China on September 28 raised its benchmark interest rate for a ninth straight time to the highest in five years to stave off inflation and narrow the gap in borrowing costs with the U.S. and other Asian countries.
With Taiwan's key rate at less than half the U.S. Federal Reserve's 5.25 percent, Governor Perng is seeking to reduce the gap to stem money outflows and keep the currency stable. By raising rates, Perng risks hurting consumer spending just as overseas demand for Taiwanese laptops and chips begins to cool.
The benchmark rate is still below the "neutral" level where it neither fuels nor curbs inflation and growth, Perng said in September. "We are moving toward a neutral rate," he said at a press briefing after the bank's quarterly policy meeting, suggesting more rate increases may come.
Perng also commented on recent fluctuations in Thailand's currency, saying the baht has moved because of so-called "hot money" from investment in stocks. He said Taiwan's dollar isn't at risk from such transactions.
"The Thai baht's fluctuation is because of the operation of hot money," he said. "Taiwan won't see such a situation."


Updated : 2021-07-28 12:28 GMT+08:00