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Taiwan Banks to Offer Yuan Deposits, Loans in Domestic Market

Taiwan banks will be able to take deposits of and make loans in Chinese yuan by the Lunar New Year as part of an agreement to facilitate greater use of the currency across the Taiwan Strait.

Individuals will be allowed to deposit up to 20,000 yuan ($3,213) each per day in local accounts, the island’s central bank said today in a statement, adding that loans in the currency will not be available to foreign companies. Yuan deposits held by Taiwanese lenders’ offshore units totaled 21.5 billion yuan at the end of November, official data show. The island’s 10-year sovereign bonds yield 1.16 percent in Taipei, less than half the 3 percent rate for similar-maturity Chinese government debt in Hong Kong.

China, Taiwan’s biggest trading partner and No. 1 investment destination, is seeking a greater role for the yuan in global finance at a time when monetary easing in the U.S., Europe and Japan is boosting the supply of dollars, euros and yen. The People’s Bank of China in December appointed the Bank of China’s Taipei branch as a yuan clearing bank, paving the way for the island to join Hong Kong as an offshore trading hub for the currency.

Cross-border trade denominated in yuan has expanded four- fold since August 2010 to almost 200 billion yuan in October, Euroclear Bank SA reported last month, citing Hong Kong Monetary Authority figures. China has currency-swap agreements totaling about 1.8 trillion yuan with countries including Australia, South Korea, Malaysia and Turkey, the Taipei-based Chung-Hua Institution for Economic Research said in a report published on Nov. 20.

Taiwan has been governed separately from the mainland since 1949 when the Kuomintang fled from Communist forces during a civil war. Mainland China has pledged to unify the two sides, by force if necessary. Exports account for more than two-thirds of Taiwan’s economy and nearly 30 percent of shipments are bound for China, finance ministry data shows.

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at xchen45@bloomberg.net; Argin Chang in Taipei at achang153@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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