THE People's Bank of China, the central bank, announced yesterday that it has authorized the Bank of China (Hong Kong) Ltd to provide yuan cash settlement services to Taiwan.

An agreement had been signed between the PBOC and the BOCHK to allow the latter to sign yuan contracts with Hong Kong branches of Taiwan commercial banks authorized for such exchanges by Taiwan authorities, said a statement on the PBOC website.

Under the pact, the Hong Kong branches would then provide yuan cash supply and withdrawal services to their head offices in Taiwan, which in turn would offer yuan cash exchange services to local clients.

Taiwan banks now can trade yuan at the Hong Kong and Shanghai Banking Corp and Bank of America in Hong Kong.

The new services could see more convenient travel across the Taiwan Strait and cement a cross-strait currency settlement mechanism and boost cooperation on currency administration, it said.

The clearing services could start in Hong Kong once all the parties involved were technically ready.