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Banks to start yuan clearing

Kyodo

Three Japanese banks on Wednesday started offering Chinese yuan clearing services to companies in Taiwan as the island’s domestic banks began accepting deposits and remittances in the mainland’s currency.

The three Japanese entities are Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corp. and Mizuho Corporate Bank.

Michio Murakami, general manager of BTMU’s branch in Taipei, said it is highly advantageous for them to be able to offer loans, remittances and deposits to corporations in Taiwan as clients can settle their accounts in Chinese yuan and thus reduce operating costs and control risks.

As of Tuesday, 46 domestic and offshore banking units in Taiwan had signed Chinese yuan clearance agreements with China’s intermediary — the Taipei branch of Bank of China — to clear yuan transactions.

The yuan clearing mechanism was made possible after Taiwan and China inked a memorandum of understanding on cross-border currency clearances and settlement mechanisms last August.

Local lenders now have direct access to the Chinese market and will no longer have to go through Hong Kong.

Describing the clearance mechanism as “a historic moment of financial exchanges across the Taiwan Strait,” Yang Shihua, chief operating officer of the Bank of China, said Tuesday in Taipei that the establishment of the mechanism is conducive to developing Taiwan as an offshore yuan trading center.

While the Bank of Taiwan’s Shanghai branch has been chosen to offer New Taiwan dollar clearing services in China, they will not be available until the bank gets the official go-ahead from Chinese authorities.

In preparation, Bank of Taiwan chairman Liu Teng-cheng said it has transported NT$25 million in cash to Shanghai and invited 22 Taiwanese and Chinese banks in China to provide New Taiwan dollar clearing services.

Liu estimated the demand for New Taiwan dollars in China for the first year at between NT$2.7 billion and NT$3 billion.