Taiwan starts exchanges between local dollar, Chinese yuan

Asian Economic News, July 7, 2008

TAIPEI, June 30 Kyodo

Taiwan banks received a green light Monday from the central bank to begin currency convertibility services between the local dollar and Chinese yuan in preparation for deepening links between the island and China.

The central bank authorized some 1,240 local bank outlets to begin exchanges between the New Taiwan Dollar and the Chinese yuan, with a limit of NTD$20,000 per person.

That limit stems from China's lack of commitment to provide Taiwan with a steady supply of yuan, at least in the initial stage of convertibility, according to local media.

Taiwan's move to liberalize currency exchange with China came after the island's parliament in June approved the liberalization measures to convenience travelers ahead of direct flight and tourism links beginning in July.

Taiwan and China will start operating direct weekend charter flights Friday in a landmark easing of tensions across the Taiwan Strait. Taiwanese and Chinese airlines will begin operating 36 round-trip flights between five cities on the mainland, including Beijing, Shanghai and Guangzhou, and eight destinations on the island.

Taiwan and China have so far only operated direct charter flights on holidays and for medical evacuations.

No direct regular air, shipping or cargo links exist across the Taiwan Strait due to more than a half century of tension between Taipei and Beijing.

That tension has eased since Taiwanese President Ma Ying-jeou won the island's March 22 election on the back of vows to improve cross-strait relations. Central to his platform were promises to establish direct weekend charter flights and tourism links.

Ma plans to open up the island to some 3,000 Chinese tourists daily later in July. Currency convertibility measures are meant to convenience those tourists and Taiwanese traveling to China via the direct weekend charter flights.

Taipei and Beijing inked two pacts in June in the Chinese capital on establishing the flights and tourism links.