Taiwan banks could issue renminbi loans in Xiamen

China intends to boost renminbi flows between Xiamen and Taiwan.

This move is part of China’s broader effort to encourage the use of the renminbi overseas. Business dealings between Taiwanese banks and Xiamen are fairly limited, however, suggesting the proposed change could be intended to draw more lenders into the renminbi business.

Taiwanese corporations may also eventually be allowed to extend renminbi-denominated loans to subsidiaries based in Xiamen. Only one Taiwanese bank, Fubon Financial Holding, has a presence in Xiamen. The bank accepts renminbi deposits.

Taiwan-based banks have been trading renminbi and began renminbi deposits since February. Deposits of renminbi on Taiwan amounted to US$2.2 billion in May.

The People’s Bank of China appointed the Taipei branch of Bank of China Ltd., one of the country's major state-owned banks, as a clearing bank for renminbi trading in Taiwan late last year.