China looking at currency settlement scheme with Taiwan

BEIJING, March 30 (Reuters) - China is actively looking at setting up a cross-Strait currency settlement scheme with Taiwan, a Chinese official said on Wednesday, as the two long-time political rivals take another step towards closer economic ties.

"Economic exchanges across the Taiwan Strait are increasing daily, and there is an objective need to set up a cross-Strait currency settlement scheme as soon as possible," said Fan Liqing, a spokeswoman for China's Taiwan Affairs Office.

"At present, we are actively researching an appropriate way to push for the establishment of this, and we hope that there will be progress soon," she told a regular news briefing in Beijing, without giving further details.

The two sides have been discussing a settlement system for some time as trade ties deepen following a landmark free-trade style agreement signed last June, and as China seeks to step up the internationalisation of the yuan.

Last July, China authorised the Hong Kong arm of Bank of China to provide yuan cash settlement services for Taiwan banks operating in the territory. [ID:nTOE66C06R]

Under that deal, two Taiwanese banks, state-run Mega Bank and Bank of Taiwan, can clear Chinese yuan, but only in cash via Bank of China's Hong Kong branch. Taiwanese in Taiwan can buy up to 20,000 yuan ($3,048) in cash per day.

No timetable has been set in terms of allowing a full currency settlement mechanism, which would also include wire transfers and allowing the opening of bank accounts in yuan.

Taiwan has been pushing for stronger ties with China under the administration of President Ma Ying-jeou since 2008, seeking to bolster the island's economic strength.

Political issues, however, remain sensitive. China claims sovereignty over the self-ruled and democratic island and has never renounced the use of force to bring it under Beijing's control. ($1 = 6.561 Yuan)

(Reporting by Ben Blanchard; Additional reporting by Faith Hung in Taipei; Editing by Jacqueline Wong)