Taiwan, China in yuan pact | Bangkok Post: business

The central banks of Taiwan and China have signed a yuan-clearing agreement as Asia's biggest economy pushes the use of its currency in international trade.

Taiwan will allow interbank trading of the yuan, creating a new exchange rate for the currency, Governor Perng Fai-nan said on Friday.The two monetary authorities are also negotiating a currency swap deal that would allow Taiwan to hold yuan assets in its foreign-exchange reserves.The deal will help Taiwanese companies move their yuan assets back to the mainland and lessen their exchange risks, Perng said in Taipei. Taiwan will have its own yuan spot rate called CNT, as opposed to CNH in Hong Kong.China has been expanding its currency relations with trade partners to promote greater use of the yuan in global trade and investment. Nations including Singapore, Japan, and Thailand have signed similar deals with the world's second-biggest economy as part of their efforts to reduce reliance on the dollar.Exports account for more than two-thirds of Taiwan's economy and some 30% of its shipments are bound for China."It's a good development as there's huge demand for yuan in Taiwan," said Penny Chen, a fund manager at Manulife Asset Management Co in Taipei. "Taiwan's exporters and SMEs will be able to reduce transaction costs."Taiwan has the world's biggest trade surplus with China and foreign direct investment by the island's companies rose 11% to $13 billion in 2011, according to official...