China, Taiwan prepare for cross-Strait currency clearing

China and Taiwan has paved the way for the establishment of a cross-Strait currency clearing mechanism by signing a memorandum on currency clearing.

A spokesman with the State Council Taiwan Affairs Office, Yang Yi, described the development as another important step for cross-Strait financial cooperation.

Accordingto Yang, a cross-Strait currency clearing mechanism will lower the cost of currency exchange and the risk of exchange rate fluctuation for business and people on both sides. Furthermore, it will facilitate cross-Strait investment and trade and expand economic cooperation.

"We are hoping currency regulators on both sides will speed up follow-up preparation work and start cross-Strait currency clearing operations as early as possible," he said.

Financial institutions from both sides have long called for a direct clearing system between banks across the Strait and expanding the services on remittance. Currently, banks from both sides can choose clearing banks in Hong Kong or Macao to carry out currency settlements and liquidations. This takes a longer time and is more trouble, especially concerning the shipping of notes.

Also, lenders on the Chinese mainland and Taiwan can rely on correspondence banks located elsewhere to provide services for a settlement and clearance of trade and investment across the Taiwan Strait.

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