Bank welcomes removing yuan cap limits
The central bank yesterday welcomed positive remarks by its Chinese counterpart last week to consider removing the daily yuan conversion limit, as demand for the Chinese currency is flourishing.
Taiwan has been seeking the removal of the daily 20,000 yuan (US$3,193) conversion cap, in line with its bid to develop the nation into a regional offshore yuan market after Hong Kong. The special administrative region scrapped the limit in November last year.
Taiwan might soon follow suit after People’s Bank of China Governor Zhou Xiaochuan (周小川) said on Thursday that China is willing to review and ease the cap given rapidly growing demand for the yuan, especially for cross-border business needs, Department of Foreign Exchange adviser Sinclair Kung (龔新光) said.
“There is definitely a chance for easing,” Zhou said during a media briefing on financial reform and foreign exchange policies.
Zhou’s comments are seen as favorable in Taiwan, where yuan deposits rose to 318.77 billion yuan last month, up 2.76 percent from January, despite fewer working days, the central bank said.
The figure represents an increase of 8.17 times since Taiwan allowed yuan deposits in February 2013.
Kung attributed the rapid increase to expectations that the yuan might gain in value in the course of internationalization and has proved relatively stable against the US dollar.
The Chinese currency strengthened against the New Taiwan dollar last year.
Yuan deposits in domestic banking units grew 3.46 percent to 266 billion yuan last month, but slowed 0.61 percent to 52.71 billion yuan in offshore banking units, the central bank said.
The figures lend support to the yuan’s popularity among individual customers, as banks offer high interest rates, and fund houses highlight yuan-denominated investment products.
For example, Bank SinoPac (永豐銀行) offers interest rates of 3.88 percent for one-year yuan time savings deposits.
The planned removal of the conversion limit would allow Taiwanese greater flexibility in making yuan investments, Kung said.
In contrast, yuan deposits weakened 2.2 percent to 981.44 billion yuan in Hong Kong in January, after rallying above the 1 trillion mark in December.
A variety of reasons accounted for the pullback in Hong Kong, where hot money comes and goes quickly in search of higher yields, foreign exchange official Gloria Chen (陳婉寧) said.
Formosa bonds, or yuan-denominated bonds sold in Taiwan, helped keep some yuan funds in the local market, Chen said, as the bonds are not considered foreign investments, giving local insurance companies more room for asset allocation.
Yuan remittance totaled 171.06 billion yuan last month, falling 34.08 percent from January, as the Lunar New Year cut down business activity among technology and financial firms, the central bank said.
