Banking, Capital Markets, Cash trade and treasury, China, Foreign Exchange, Taiwan - Friday, February 8, 2013 20:02 - 0 Comments

FT beyondbrics: Taiwan opens to RMB – and Chinese banks

Financial Times Beyondbrics, February 8 2013 – to see it at the FT click here

Taiwan’s financial services industry enjoyed a landmark moment this week when cross-border renminbi trade settlement services were officially launched in the island state. The prize: the chance to create an offshore RMB market in Taiwan to mirror that of Hong Kong.

 

Early momentum was nothing to write home about. Standard Chartered Taiwan proudly announced that it had completed “nearly Rmb6m”, or less than $1m, of RMB-denominated transactions for several Taiwanese corporates on day one, February 6. But the potential is considered to be great. Frances Cheung, senior strategist for Asia ex-Japan at Credit Agricole CIB, points out that in Hong Kong, RMB deposits peaked at 10.4 per cent of total deposits and stand at 9 per cent today; were Taiwan to find one tenth of its deposits in RMB, that would equate to Rmb525bn of assets.

 

Few expect to see quite that much activity – the RMB is no longer considered a sure-fire appreciation bet, for a start – but Nathan Chow, economist at DBS Bank, tells beyondbrics he expects the RMB liquidity pool in Taiwan to reach Rmb140bn, or 2 per cent of total local deposits, by the end of 2013. Then it’s up to Taiwan’s banks to make the best of it. “Whether Taiwan can further enhance its RMB liquidity pool depends on the pace or ability of the creation of RMB-denominated investable assets,” he says.

 

Taiwan’s banking sector needs this, and then some. In an overbanked market, in an economy desperately reliant on a healthy US to sustain its exports, and with a lucrative line in fees amputated by credit card reform in 2009, any new line of income is important. While warmer cross-straits relations have benefited many areas of the Taiwan economy since President Ma Ying-jeou took office in 2008, bankers feel their sector has been slow to benefit, with less access to mainland business than they had hoped. So the chance to build an offshore RMB centre, and to be an integral part of the internationalisation of the Chinese currency, has a lot of appeal.

 

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