Taiwan has edge in developing offshore RMB center: mainland banker

Taiwan is in a good position to establish an offshore Renminbi (RMB) center, given its close economic ties with the mainland and ballooning yuan deposits, a mainland banker said Tuesday.

Annual trade volumes between Taiwan and the Chinese mainland have been stable at around 170 billion U.S. dollars, with a huge surplus on Taiwan's side, Li Guofu, chief of China Construction Bank's (CBC) Taipei branch, told Xinhua.

"Industry insiders and regulators across the Taiwan Strait have expected trade transactions to gradually be settled in RMB instead of the U.S. dollar, which will also help to promote the RMB's internationalization," Li noted.

Taiwanese people are also endorsing establishment of an RMB offshore market due to the large amount of RMB they hold, he said, adding that mainland banks could contribute to the market's founding by helping to develop more financial products.

Since Taiwan started to allow RMB deposits in 2013, the island has witnessed its offshore yuan pool surge to more than 300 billion yuan (49 billion U.S. dollars), now second only to Hong Kong, according to Li.

"Investors could benefit most if they use the yuan to buy high-yield assets in the mainland, but now there are simply not enough channels in Taiwan for the RMB to flow back to the mainland markets," the bank chief said.

Currently, Taiwanese investors can only use the yuan in making deposits, transfers and buying yuan-denominated bonds, Li said.

Once Taiwan's legislature passes the cross-Strait service trade pact, which gives the island a 100-billion-yuan quota for Taiwanese investors to buy securities in the mainland under the RMB Qualified Foreign Institutional Investors (RQFII) program, a crucial new channel will be opened for yuan to flow back, he said.

At that time, mainland banks can play a more significant role in introducing Taiwan banks into the mainland market, Li said.

So far, the CBC, Bank of China and Bank of Communications have been the only three mainland-based banks in Taiwan.