Some banks have resorted to the measure of 'only buying, no selling', as their supplies dwindle fast

The Central Bank advised the two major overseas banks in Taiwan that are authorized suppliers of renminbi (RMB) to acquire banknotes directly from the mainland to beef up their supplies, a Central Bank official said Monday.

Taiwan residents, who were first allowed to purchase the mainland currency only months ago, have been snapping up the RMB in anticipation of appreciation this year.

The "RMB rush" has caused shortages of RMB banknotes in Taiwan, a development that prompted local banks to become reluctant to sell the currency. Some even went to the extend of implementing an "only buying, no selling" strategy.

Fielding questions at the Legislative Yuan, Central Bank Deputy Governor Chou A-ting said RMB supplies in Taiwan had declined substantially over the past two weeks.

The amount of RMB banknotes made available by HSBC and Bank of America in Asia has dropped noticeably over the past several weeks, and their acquisition of RMB from financial markets around Asia has diminished by half, Chou said.

Chou made the remarks in response to questions from ruling Kuomintang legislator Lai Shyh-bao, who inquired about the NT$-RMB exchange rate and limits on how much mainland currency Taiwan residents are allowed to buy from banks.

Chou said the NT$-RMB exchange rate is about 4.8:1 and that people are allowed to purchase 20,000 yuan per transaction from local banks.

Lai suggested people could just go to the bank several times a day and acquire as many RMB notes as they wished.

"People are hoarding the yuan," Lai told Chou.

A Mega Bank official said earlier that with its store of yuan decreasing drastically as a result of rising demand, the bank was forced to acquire yuan from branches of HSBC and Bank of America based in Hong Kong.

The anticipation of the yuan's rise was so strong that HSBC even stopped offering quotes on the currency.

"Over the past month, we have either sourced renminbi cash at higher prices or obtained none at all," the Mega banker said.

China Daily/CNA

(HK Edition 04/20/2010 page4)