China plans to push simplified cross-strait currency clearance agreement.
Taipei, June 14, 2012 (CENS)--Mainland China plans to propose a simplified version of cross-Taiwan Strait currency clearance agreement, by directly designating the Taipei branch of the Bank of China as the currency-clearance banks, instead of designating one Taiwanese bank and one mainland Chinese bank to carry out currency clearance.
Under the new arrangement, both sides can sign currency-clearance agreement immediately after the inauguration of the Taipei branch of Bank of China, enabling Taiwanese banks to open renminbi deposit business.
According to the original plan of the Central Bank of China (CBC), the Shanghai branch of the Bank of Taiwan will serve as the clearance bank for NT dollar in China, while the Taipei branch of Bank of China will serve as the clearance bank for NT dollar in Taiwan.
Considering the complicated process and the lack of actual need for NT dollar in mainland China, mainland China intends to open up renminbi clearance in Taiwan first and designate the Taipei branch of the Bank of China as the clearance bank. Central banks of both sides are discussing enforcement method and details for the new proposal and are expected to reach an agreement by the end of June.
Bankers analyze that normally for the signing of cross-Strait currency clearance agreement, both sides must have currency clearance banks. To accelerate currency clearance, it is an expedient method to start from the clearance of renminbi. With mainland China being Taiwan's largest trade partner, the signing of cross-Strait currency clearance agreement will enable direct conversion between NT dollar and renminbi in Taiwan, thereby cutting the conversion cost.
Banking managers pointed out that domestic banks have completed preparations, both for hardware and software, for initiation of renminbi deposit business and can kick off the business immediately after the signing of cross-Strait currency clearance agreement. As a result, local people can deposit their renminbi holding at domestic banks to earn interest income and exchange-rate benefits from the appreciation of renminbi. ((Philip Liu))