Taiwan's Cabinet has approved plans to allow mainland Chinese companies to invest in domestic lenders, brokerages and insurers, paving the way for a broader economic accord as cross-strait relations improve.
Premier Wu Den-yih has approved plans drafted by the Financial Supervisory Commission, David Chen, a director at the government Information Office, said by telephone today. The financial regulator needs to seek parliament's approval, he said.
The approval underscores Taiwan President Ma Ying-jeou's efforts to strengthen ties with the island's biggest trading partner and No. 1 overseas investment destination as he seeks to bolster the economy's recovery from its deepest recession. Taiwan's benchmark stock index has fallen 5.4 percent this year and is headed for its worst first quarter in 15 years.
"The more they open up, the better it is for us," said Andy Wei, who helps manage the equivalent of $3.1 billion at PCA Securities Investment Trust Co. "We want to know the details: that is, how much they are opening up to China."
The plans submitted by the Financial Supervisory Commission include cross-strait cooperation in banking, brokerages and insurers' daily operations, and letting companies on each side invest in the other. Rules on setting up branches, subsidiaries and taking stakes in each other's companies have also been stipulated, Shiau Chang-ruey, chief secretary of the regulator, said by telephone today.
Formal Document
Shiau declined to provide more details. He said he had heard about the Cabinet's approval, though he is yet to receive the formal document.
The Taiex index was little changed at 7,748.33 at the close of Taipei trading today, while an index for financial and insurance stocks gained 0.2 percent. The local dollar appreciated 0.2 percent to NT$31.77 as of the midday break, according to Taipei Forex Inc. It touched NT$31.727 yesterday, the strongest level since February 6.
Taiwan-China relations have improved since Ma took office in May 2008 and dropped the pro-independence stance of predecessor Chen Shui-bian. The two sides in January started formal talks on an economic cooperation framework agreement, or ECFA, on tariff reduction and cross-border investments. They are slated to meet again this month in Taipei.
China and Taiwan in November also signed three memoranda of understanding to ease restrictions on investments in each other's banks, brokerages and insurers. The agreements took effect on January 16, though detailed rules governing the investments haven't been announced yet.
No Branches
Currently, Taiwanese lenders' eight representative offices in China aren't allowed to offer banking services, and are limited to doing marketing and research. China allows foreign banks to set up branches after three years of operating a representative office.
Industrial & Commercial Bank of China Ltd, the world's most profitable bank, and Bank of China Ltd, the country's third-largest lender, have said they plan to be the first mainland banks to have a presence in Taiwan. Beijing-based ICBC has a market capitalisation of 1.65 trillion yuan ($242 billion), more than three times the value of Taiwan's 37 listed financial services companies.
Taiwan and China have been ruled separately since Chiang Kai-shek's Kuomintang, or Nationalists, fled to the island after being defeated by Mao Zedong's Communists in 1949. China regards Taiwan as part of its territory.
http://www.businessweek.com/news/2010-03-12/taiwan-approves-plans-to-let-chinese-banks-invest-update2-.html
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