CHINA> Cross-Straits Biz
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CHINA> Cross-Straits Biz
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No go-ahead for Taiwan banks to trade renminbi
By XING ZHIGANG (1)
Updated: 2003-02-12 09:43 Beijing has made clear that Taiwan's "central bank" is not entitled to give approval to allow trading of renminbi, the mainland's currency, at the island's commercial banks.
Taipei has considered the move in a bid to encourage capital return from the Chinese mainland, according to media reports. But a senior central bank official yesterday rejected the possibility of allowing direct conversion of the yuan in Taiwanese banks in the near term - although did not rule out implementing the plan in the longer term. Currently, both the island and mainland ban official trading of each other's currency in their banks. For the situation to change, the island would have to first reach a clearing agreement with the People's Bank of China (PBOC) to establish an account-settling mechanism between the yuan and Taiwanese dollar. The mainland was willing to talk with the island on setting up such an arrangement in the future for the benefit of cross-Straits economic exchanges, said Han Mingzhi, deputy director-general of the International Department of the PBOC. But it is technically impossible at present for Taiwanese banks to trade the mainland's currency, he said. "Although both sides of the Taiwan Straits have the intention to allow direct exchanges between their currencies, we have never contacted each other about how to put such an arrangement into place," Han told China Daily in an exclusive interview. "So there is still a long way to go before we can manage to reach an agreement on the issue." Han, however, said the PBOC has never been formally notified of such a proposal put forward by the island's "central bank". "We have known almost nothing about the proposed plan from the other side although there are sound communications channels between us," the official said. He went further to say that the PBOC is ready to talk with its counterpart on the island about the plan as both sides have the need to open up such businesses to benefit their closer economic ties. "We are sure we can find a final solution to such a problem as long as we can sit down and speak out our minds," Han said. He added that the mainland holds the principle of mutual beneficial and equity in dealing with cross-Straits financial links. Despite huge inflow of Taiwanese investment in the mainland and rapidly growing cross-Straits trade volume, simmering political tension has long hindered financial relations between Taiwan and the mainland. Previously, money transfers were usually moved through a third area - such as Hong Kong, Macao or the United States. In late 2001, Taiwan approved direct remittance of funds through offshore Taiwanese banking units as the first step toward opening up the remittance of funds from the mainland. In July last year, the mainland authorities also permitted mainland commercial banks to open direct remittance links across the Straits. Official statistics from the Ministry of Foreign Trade and Economic Co-operation indicated that Taiwanese investors have poured more than US$61.47 billion of investment into 55,700 businesses on the mainland. By the end of last year, trade volume between Taiwan and the mainland had totalled US$267.93 billion. Qin Jiangchi, deputy secretary-general of the China Finance Society, said cross-Straits direct remittance fails to meet the real need of strengthened economic exchanges between the two sides although it can greatly lower operational costs. Because of the absence of a direct exchange mechanism between the yuan and Taiwanese dollar, the remittance has to be conducted through a third full convertible currency, in most cases the Hong Kong dollar or US dollar. Qin said there should not be a technical problem for direct exchange between the yuan and the Taiwanese dollar because it can be easily conducted through the global clearing system by joining the Global Interbank Financial Telecommunications Community. The most critical problem at present is when issuing banks on both sides can reach a clearing agreement to fix on an exchange rate between the two currencies, the researcher said. Financial experts said the mainland's rigid control over the convertibility of yuan on the capital account may also add to the difficulty of achieving direct exchange between the two currencies across the Taiwan Straits. |
