Taipei, Chinese yuan deposits at banks in Taiwan rose slightly at the end of July from a month earlier, although the Chinese currency slumped against the U.S. dollar, according to the Taiwan's central bank.
The weakness of the yuan against the greenback prompted bargain hunters, in particular retail investors, to raise their holdings in the Chinese currency, the central bank said.
The central bank data showed the balance of yuan deposits at Taiwanese banks, including negotiable certificates of deposit (NCDs), at 312.91 billion yuan (US$45.41 billion) as of the end of July, up by 662 million yuan from the end of June.
It was the second consecutive monthly hike, following a 973 million yuan increase in June, despite the yuan's 1.75 percent drop against the U.S. dollar amid trade frictions between the United States and China.
The central bank said retail investors more than institutional investors were attracted to the higher yuan deposit rates offered by banks in Taiwan.
As of the end of July, yuan deposits at domestic banking units (DBUs) in Taiwan rose to 281.25 billion yuan from 281.17 billion yuan a month earlier, while the balance at offshore banking units (OBUs) increased to 31.67 billion yuan from 31.08 billion the previous month.
Meanwhile, yuan-denominated remittances in July totaled 168.67 billion yuan, up from 110.34 billion yuan in June, with remittances through DBUs at 86.77 billion yuan and through OBUs at 81.90 billion yuan, according to the central bank.
According to market analysts, yuan deposits in Taiwanese banks are unlikely to grow at a rapid pace unless the banks start offering better incentives.
Furthermore, unless the trade war between the U.S. and China deescalates, the growth rate of yuan deposits is likely to slack off, analysts said.
In 2013, Taiwan lifted a ban on yuan-denominated transactions by DBUs at a time when the pro-China Kuomintang was in power and exchanges were growing between the two sides.
Prior to that, only the OBUs of Taiwanese banks were allowed to accept yuan deposits and conduct other yuan transactions.
In June, 2015, the balance of yuan deposits at banks in Taiwan hit a record high of 338.22 billion yuan.
Source: Focus Taiwan News Channel