TAIPEI - Banks from the Chinese mainland and Taiwan on Wednesday launched New Taiwan Dollar and yuan business on both sides, marking the establishment of a cross-Straits monetary settlement mechanism.

A total of 46 designated foreign exchange banks and financial institutions in Taiwan formally launched their yuan business on Wednesday after signing currency clearing agreements with the Bank of China's Taipei branch.

People in Taiwan can now open renminbi accounts in those banks, and more products based on renminbi will be provided to their customers, said major lenders in Taiwan.

These banking institutions have been designated by the mainland's People's Bank of China to carry out yuan business clearing in Taiwan.

In the meantime, banknotes worth 25 million New Taiwan dollars were shipped directly to the Shanghai branch of the Bank of Taiwan on Wednesday.

The banknotes will become available for over-the-counter exchange after approval is gained from the mainland's foreign exchange authority.

The two sides signed a memorandum on currency clearing in August last year, paving the way for the clearing mechanism and taking another important step for cross-Strait financial cooperation.

Previously, banks from both sides had to choose clearing banks in Hong Kong or Macao to carry out currency settlements and liquidations. Lenders could also rely on correspondence banks located elsewhere to provide services for a settlement and clearance of trade and investment across the Strait. This took a longer time and was more troublesome, especially concerning the shipping of banknotes.

Business circles, especially in Taiwan, have looked forward to a clearing system for a long time. Experts in Taiwan said that the island should get a taste of the internationalization of renminbi so as to share in the benefits from the mainland's development.

"Renminbi business has great potential in Taiwan as the two sides are expanding their economic and trade relations," said Cai Rongjun, chief of Taipei Branch of the BOC.

New Taiwan Dollar (NTD) business in the mainland attracted the attention of many Taiwan businessmen working in mainland and Taiwan-based financial institutions.

According to the agreement between Taiwan's monetary authority and the Shanghai Branch of Bank of Taiwan, a total of 2 billion NTD banknotes will be provided to the mainland, while demand will be as high as 2.7 billion.

"The currency clearing system can reduce exchange losses, greatly benefiting cross-Strait economic and trade relations," said Yen Quei-tien, chief of the Shanghai branch of the Bank of Taiwan. "It also means a lot of opportunities for financial companies."

Taiwan's insurance, investment and trust companies are all interested in renminbi business, and are now designing renminbi products for Taiwan people.

"As people-to-people and economic and trade relations across the Strait are becoming increasingly close, the demand for quality and convenient exchange services will also increase," said Yen.