Chinese yuan deposits fall to 6-year low

Taipei,  Chinese yuan deposits held by Taiwanese banks at the end of April fell to their lowest level in more than six years as slumping interest rates for the currency made it less attractive to hold, Taiwan’s central bank said Friday.

The balance of yuan deposits at banks in Taiwan as of the end of April totaled 246.01 billion yuan (US$34.64 billion), down about 6.11 billion yuan from the end of March, according to central bank data.

That was the lowest since February 2014, when the yuan deposit balance was 247.05 billion yuan.

Chen Wan-ning (陳婉寧), a specialist with the bank’s Foreign Exchange Department, said the fall in yuan deposits in Taiwanese banks’ domestic banking units came after institutional investors allocated their yuan-denominated funds to investments or as payments for purchases.

In addition, Chen said, retail investors moved their yuan-denominated funds to buy insurance policies in yuan terms.

Holding the yuan also proved less attractive as China eased its monetary policy to offset the adverse effects of the COVID-epidemic, driving down interest rates on Chinese yuan deposits.

Yuan deposits in DBUs of Taiwanese banks fell to 213.51 billion yuan at the end of April from 220.53 billion from a month earlier, while yuan deposits in offshore banking units rose to 32.50 billion yuan from 31.60 billion, the central bank said.

Yuan deposits hit their all-time high of 338.22 billion yuan in June 2015, but since the balance fell below the 300 billion yuan mark at the end of 2018, the amount has mostly trended lower.

The DBUs of local banks have been allowed to conduct yuan-denominated transactions since February 2013, when financial exchanges with China were on the rise under the then-Kuomintang government.

Before the ban was lifted, only the OBUs of Taiwanese banks were allowed to accept yuan deposits or conduct other yuan transactions.

 

Source: Focus Taiwan News Channel

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