Shanghai, April 13 (CNA) Taiwan could play an important role in the internationalization of the Chinese yuan with the establishment of a offshore market for the currency there, a Chinese economist said in a financial forum held in Shanghai Friday.

Lian Ping, chief economist of the Bank of Communications in China, said during the forum that offshore markets for the Chinese yuan are a crucial condition for wider circulation of the currency around the world.

"The development of such markets could help push the internationalization of the Chinese yuan," Lian said.

The best locations for such markets, he went on, are regions that have close economic ties with China, such as Taiwan and Hong Kong, which have strong demand for financial products denominated in the Chinese yuan.

Transactions of the Chinese currency in overseas markets would create a flow of capital, Lian said.

Meanwhile, Shea Jia-dong, chairman of the Taiwan Financial Services Roundtable Co., said the biggest challenge for the Chinese yuan's internationalization is opening the country's capital account.

Shea said the yuan's internationalization requires a healthy, strong and flexible domestic financial market and added that China should open up its market while enhancing supervision.

It should also allow the market to decide interest rates offered by financial services, and more flexibility in its foreign exchange rates, he said.

Although cooperation in the financial arena across the Taiwan Strait began relatively late, Shea suggested that China further open up its market to Taiwan, which could in turn help the development of China's banking sector.

(By Chou Hui-ying and Kay Liu)
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