TAIPEI (REUTERS) - Offshore yuan trade kicked off on Wednesday in Taiwan, which counts China as its largest export market, as part of moves by the Chinese government to internationalise the currency and smoothen economic ties with its one-time political foe.
Taiwan is a latecomer in developing offshore yuan business as such trade has been expanding in Hong Kong and London.
The Chinese yuan was quoted at 6.2145/6.2155 to the US dollar in Taiwan, in line with the rate in Hong Kong at 6.2135/6.2165. Onshore spot yuan stood at 6.2319 at midday.
"I'm very busy now as many clients are buying renminbi in the market. The trading is quite active in the morning since it is the first day," said a trader at a Taiwan bank.
Another trader said prices in Taiwan matched those in Hong Kong. "The price so far is similar to Hong Kong's, but I'm not sure how it will perform going forward," the trader said.
The much-anticipated trading comes as Taiwan seeks to play a key role in the globalisation of the yuan, also known as the renminbi (RMB), as the Chinese currency moves toward becoming fully convertible.
Analysts said Taiwan has natural demand for the yuan and has potential to accumulate funds quickly.
"We see promising prospects for the RMB business in Taiwan, given Taiwan's trade surplus with China (a source of RMB) and Taiwan's outward FDI (foreign direct investment) to China, among other cross-strait flows," said Mr Frances Cheung, a senior
strategist of Credit Agricole CIB, in a research report.
The yuan clearing rate offered by Bank of China Taipei branch opened at 6.2265/6.2325 to the US dollar on its first trading day in Taiwan, similar to what was offered by Bank of China Hong Kong.
Taiwan's central bank said on Tuesday it would allow the island's banks to start conducting yuan currency business on the island from Wednesday.
Previously, only offshore banking units of Taiwan banks could take yuan deposits from overseas individuals and companies, suggesting a vast potential to expand the pool once local residents can do so.
Taiwan and China have been moving to bolster their ties in the financial sector, which have lagged the closer cooperation in manufacturing and other areas due to Taiwanese concerns over influence by China.
Bank of China's Taipei branch also said it was offering an interest rate of 0.648 per cent for yuan deposits in current accounts. That was slightly higher than the 0.629 per cent it offered in Hong Kong.
Statistics from the City of London last April showed that London's spot yuan trading represented 26 per cent of the global offshore yuan spot market, following Hong Kong's 56 per cent.