Taiwan is considering becoming a trading centre for the Chinese currency, Taipei officials said today, indicating closer economic ties between the long time political rivals.

The Central Bank of Taiwan said in a statement that it is mulling developing Taiwan into an offshore trading centre for the yuan, citing the country’s growing trade with China.

Hong Kong is currently the only offshore trading centre for the yuan, boosted by the endorsement of leaders in Beijing. Singapore is also reported to be considering operating an offshore yuan trading hub as the use of the yuan in international transactions increases.

Taiwan has allowed offshore banking units and overseas branches of Taiwanese banks to conduct business in yuan as more Taiwanese companies operating in China demand trade settlements in yuan.

A free trade agreement between China and Taiwan took effect last September, enabling the two economies to take a step closer to economic integration.

The Economic Cooperation Framework Agreement is considered to be a landmark event between the two sides that have technically been “at war” since 1949 when the nationalist army of Chiang Kai—shek fled to Taiwan after being defeated by the communist forces led by Mao Zedong.

China, which eclipsed Japan as the world’s No 2 economy this year, has been seeking to reduce its reliance on the US dollar and promote the yuan as a global currency.

In a step toward internationalising the Chinese currency, China’s central bank began trials for cross-border trade settlements with the yuan in July 2009. The trials were expanded to 20 provinces and regions by June of last year.

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