People’s Bank of China recently authorized the Bank of China HK as the RMB cash settlement bank for Taiwan. The authorized Taiwanese counterpart can settle RMB cash transactions in Hong Kong. Before this arrangement, RMB settlements were done by two Hong Kong commercial banks. Using Hong Kong as an intermediate platform instead of direct trade is based on the facts that: (1) Mainland China is still restraining capital accounts; (2) Hong Kong has a more complete structure of RMB based transaction management. RMB transactions inside Taiwan are still an item pending negotiation.
Source: China Review News, July 13, 2010