A Financial Times Service
China Confidential - Premium Investment Insight
03 September 2012

The authorities in Beijing have given domestic banks in Taiwan the green light to clear transactions in the Chinese currency, potentially giving Taiwanese corporates greater access to renminbi liquidity offshore. Previously, only overseas banking units in Taiwan were allowed to clear renminbi transactions (via Hong Kong). Details of the agreement are vague with no official clearing bank named. A Taiwanese official was also quoted as saying that Taiwan will establish its own renminbi interbank and spot markets using a CNT rate, rather than CNH, which is traded in Hong Kong. This move, if true, strikes us as somewhat confusing given that offshore renminbi (CNH) is already fully convertible. We therefore believe the decision to grant Taiwan official clearing status is motivated more by a desire to strengthen cross-strait relations than by any (real) attempt to internationalise the renminbi.



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