Letters of credit (L/Cs) have started to flow direct across the Straits of Taiwan. This follows landmark decisions by the Chinese and Taiwanese authorities to allow direct remittances between mainland China and Taiwan (DCWorld 06 August 2002).

One of the first banks to send a L/C direct across the Straits was the Shanghai branch of the Bank of China. It sent an L/C worth about US$1million to its banking partner in Taiwan, the Taipei branch of the Australia-New Zealand Bank (ANZ), without having to make the remittance through a third bank.

Remittances used to have to go via a third bank that was not located on the Chinese mainland or in Taiwan, an exercise that added time and costs to transactions between the two territories.

Local bankers reckon the new arrangements will cut the time taken for an L/C to cross the Straits by between three and eight days. The Bank of China says it has arranged for six foreign banks in Taiwan, including Citibank and HSBC to participate in the new arrangements.

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