Renminbi (RMB), has increasingly made its presence felt in global foreign exchange markets as China continues its efforts to internationalize its currency. Efforts to internationalize the RMB have continued apace, ranging from new RMB clearing arrangements around the world to the opening of the offshore financial market without national boundaries.
The Offshore Financial Centres (OFCs) are an integral part of globalisation to connect the domesic and international financial markets. They facilitate growing mobility of finance by facilitating no/low tax, no/low regulation, secrecy and anonymity to enable footloose capital to roam the world. Over the past 7 years, some financial centres, such as Hong Kong, Singapore and to an extent London and Toronto, were already established as offshore RMB centres. In May 2016, financial products allow borrowers to issue RMB-denominated securities in the US for trading and settlement purposes have launched which presents a significant milestone in serving to meet the growing demands among investors in the United States and around the world to have access to the RMB.
China is the world's second-biggest consumer economy, the success of an offshore RMB market cannot do without an efficient and effective payment and settlement platform. Therefore, under the plan by the China government, the system processes RMB payments and settlements involving remittances and funds transfers, both onshore and offshore, has increased the efficiency of processing RMB flows, push up RMB-related business volume, and promote a wider variety of RMB products and services to fasten the internalization of RMB. Offshore RMB centres have exerted significant influence on not only the progress of RMB internationalization but also the China economy. Its overall impact on the monetary system’s stability and will depend on how the offshore RMB centres are operated with appropriately complying with the laws and regulations. Therefore, to study on these topics are meaningful for TW to develop its offshore RMB centre.
To participate the economy growth of the internalization of RMB, on August 31 2012, Taiwan and China signed an MOU on Cross-Strait Currency Clearing Cooperation. After the MOU was inked, in order to assist Taiwan's financial institutions to develop branches on the Chinese mainland, integrate Taiwanese businesses' trade and financial operations, expand Taiwanese financial institutions' operational niche in the mainland financial market, strengthen Taiwan's trade and economic status, augment its competitive advantages in the financial sector and create higher industrial value, the Executive Yuan approved a program to develop financial operations with cross-strait characteristics on September 6 2012. However, the numbers recently didn’t show significant growth, it is then meaningful to analyze the issues and risks when developing the offshore RMB center in Taiwan and better enhancing its governance and ranking in the global financial markets.
This study would conclude and suggest China to focus on RMB flows between onshore and offshore markets when deregulating the offshore RMB capital market. To build up the laws, regulations and governance for the offshore RMB centres when expanding further with greater prominence of the capital market. In terms of the suggestions to develop the offshore RMB center in TW, it’s important to strive for RQFII, currency SWAP agreement and governance structure in order to both deregulate the offshore center business and prevent the money laundering and financial crime.