Taiwanese banks are starting to allow their customers to make deposits, obtain loans, and buy bonds denominated in China's tightly controlled yuan, or renminbi - another milestone in the ever tightening economic relations between the former rivals.

The new regulations go into effect Wednesday, and follow a currency clearing agreement signed in August. They appear aimed at leveraging Taiwan's $150 billion annual trade with the mainland as a platform to help transform the island into an offshore trading center for the yuan, similar to Hong Kong.

Similar currency regulations go into effect in China later this month.

Taiwan and China split amid civil war in 1949. They have pledged to foster financial cooperation amid their rapidly improving political and economic relations.