萬國法律事務所

The Central Bank of Taiwan is now planning to establish a Cross-Strait Currency Clearing System. The proposed Taipei branch of the Bank of China will operate the clearing system in Taiwan. On the other hand, Taiwanese banks, including the proposed Bank of Taiwan Shanghai branch and the Mega Bank Soochow branch, will operate the same services in China.

Following the signing of a Cross-Strait financial MOU, financial institutions in Taiwan and China are looking for more opportunities for financial cooperation. Due to Taiwan’s substantial surplus of trade with China, the Central Bank of Taiwan has accumulated large quantities of RMB, which have been converted to U.S. Dollars. By introducing the direct currency clearing system, foreign exchange costs and risks can be effectively reduced. This is also expected to accelerate internationalization of the RMB.

According to Hui Li Lee, the head of the Bank of China, the rich experience in operating RMB clearing heightens the bank’s advantage against other Chinese banks. In fact, the Central Bank of Taiwan has been consulting with the Chinese government since 2010. However, it is a sensitive issue as currency is a symbol of national sovereignty. Thus, the plan has been postponed for years.

Now governments in both Taiwan and China are trying to figure out all of the details. The Bank of China, the Bank of Taiwan, and Mega Bank are each applying and preparing for their new branches. Once the currency clearing system is established, Taiwan may become a strong offshore RMB center due to its comparative advantages over Singapore and London in this regard.

The Central Bank of Taiwan will present its plan to Taiwan’s Legislative Yuan this month. Once the system is accepted by the Legislative Yuan and both governments approve the branches, the new Cross-Strait Currency Clearing System will commence operations.