July 9, 2010 (Chinavestor) Taiwan said the Economic Cooperation Framework Agreement (ECFA), the landmark trade agreement between the island nation and mainland China, could boost its GDP by 0.4% and help add 60,000 new jobs in the next two years. A boost to GDP of 0.4% is equivalent to $1.71 billion.
Analysts speculated that China purchased Japanese debt after paring its holdings of Euro-denomiated holdings. The Japanese Yen has held up relatively well while riskier currencies have faltered in recent months, making Japanese bonds all the more attractive to China.
China may be considering small alterations to its foreign exchange reserves, the largest in the world and largely denominated in U.S. Dollars. The yield on Japan’s benchmark 10-year bond dropped last quarter by the most since the last three months of 2008, declining to 1.055 percent on July 1, the lowest since August 2003, Bloomberg News reported.
China is Japan's largest export and customer and Japan has been working to bolster ties with China as China's economic growth continues to soar. China boosted its holdings of U.S. Treasuries to $900.2 billion in April, Bloomberg reported. China holds $2.45 trillion in foreign currency reserves.
The trade accord is designed to cut tariffs and boost Taiwan's relationship with the mainland, the top destination for Taiwanese exports. The two countries could make an announcement as early as Wednesday that includes a list of items that will be subject to lower tariffs.
The two sides are also trying to shorten the time needed for Taiwan banks to qualify for a license to conduct yuan business on the mainland, according to Bloomberg News. Taiwan has been a sovereign nation since 1949 though China has been adamant about its desire to control the island nation.
