Taiwan is in a good position to establish an offshore renminbi center, given its close economic ties with the mainland and ballooning yuan deposits, a mainland banker said Tuesday.

Annual trade volumes between Taiwan and the Chinese mainland have been stable at around $170 billion, [Hong Kong Company Formation & Registration]with a huge surplus on Taiwan's side, Li Guofu, chief of China Construction Bank's Taipei branch, told Xinhua.
 
"Industry insiders and regulators across the Taiwan Strait have expected trade transactions to gradually be settled in yuan instead of the US dollar, which will also help to promote the yuan's internationalization," Li noted.

Taiwan people are also endorsing establishment of an yuan offshore market due to the large amount of renminbi they hold, he said, adding that mainland banks could contribute to the market's founding by helping to develop more financial products.

Since Taiwan started to allow yuan deposits in 2013, the island has witnessed its offshore yuan pool surge to more than 300 billion yuan ($49 billion), now second only to Hong Kong, according to Li.

"Investors could benefit most if they use the yuan to buy high-yield assets in the mainland, but now there are simply not enough channels in Taiwan for the yuan to flow back to the mainland markets," the bank chief said.

Currently, Taiwan investors can only use the yuan in making deposits, transfers and buying yuan-denominated bonds, Li said.

Once Taiwan's legislature passes the cross-Straits service trade pact, which gives the island a 100-billion-yuan quota for Taiwan investors to buy securities in the mainland under the Renminbi Qualified Foreign Institutional Investors (RQFII) program, a crucial new channel will be opened for yuan to flow back, he said.

At that time, [Businesses Registration]mainland banks can play a more significant role in introducing Taiwan banks into the mainland market, Li said.

So far, the China Construction Bank, Bank of China and Bank of Communications have been the only three mainland-based banks in Taiwan.