The establishment of a clearing system for Chinese yuan transactions in Taiwan has raised hopes that Taiwan will play a key role in the internationalization of the yuan, boding well for higher quotas as well as for Taiwan to join Hong Kong in becoming an off-shore yuan centre.
Chairman Guo Shuqing of the China Securities Regulatory Commission is set to visit around February, with the higher quotas on the agenda for talks between the two sides, said Lee Jih-chu, vice chairwoman of Taiwans Financial Supervisory Commission.
Chinese quotas for Renminbi Qualified Foreign Institutional Investment (RQFII) and QFII allow foreign investors to use offshore yuan to buy mainland securities. Were making an all-out effort to get as much QFII and RQFII quotas as possible. After all, its very difficult to apply, as so many foreign investors are already waiting in line, Lee told Reuters on Wednesday.
A global financial group has been awarded a QFII quota of only $1 billion, she said, without elaborating further.
Fubon Financial, one of the islands top five financial holding firms, is among a few Taiwanese companies that have been granted a QFII quota, of $400 million.
Taiwan, whose banking sector has generated lower returns on equity than most Asian peers, is hoping to take advantage as China plans to make the yuan basically convertible as early as 2015.
Earlier this month, Guo said in Hong Kong that China could increase by 10 times the current level of investment quotas for RQFII and QFII.
China introduced the RQFII scheme at the end of 2011 with an initial quota of 20 billion yuan ($3.2 billion) and raised that to 70 billion yuan last year.
China and Taiwan inked the clearing agreement in September, marking the beginning of the final stage of an economic integration that has drawn Taiwan closer to its one-time political foe and lifted trade to more than $160 billion annually.
The system paves the way for Taiwan to develop an offshore yuan centre, attracting Hong Kong and London to work together to make their yuan centres sizes bigger, Lee said.
I and HKMA CEO Norman Chan have reached a consensus to work together to increase the size of our offshore RMB markets, Lee said. The UKs representative in Taiwan also has approached me for similar topics.
Many people say Taiwan will compete with Hong Kong in the offshore yuan market. I dont see it that way ...
There are so many opportunities, she said, adding that details have not yet been worked out. Taiwan will begin talks with Hong Kong and the UK on an off-shore yuan centre in the first quarter, Lee added.
Bank of China has been appointed as the clearing bank for yuan transactions in Taiwan.
* Taiwan to ask China for more QFII, RQFII quotas
* China securities regulator to visit Taiwan for first time
* Taiwan to talk with HK, UK on offshore yuan market tie-up