Fri, Jul 18, 2003 - Page 11 News List

MAC mulls easing China financing

By Joyce Huang and Fiona Lu  /  STAFF REPORTERS

A senior official said yesterday that the government is mulling ways to relax restrictions on cross-strait financial and banking exchanges, facilitating direct fund transactions through China-based off-shore banking units (OBU).

"The long-term objective of the government is to help our busi-nesspeople set up a base in China as a step toward expanding their business globally," Tsai Ing-wen (蔡英文), chairwoman of the Mainland Affairs Council, said at a seminar on cross-strait trade relations in the post-SARS period.

"To meet the financing needs of China-based Taiwanese businesses, the government is reviewing [cross-strait] financial policies to broaden the business scope of OBUs while allowing them to raise capital at home," Tsai said.

However, she said the government would also try to entice businesspeople back from China until mechanisms to manage or ameliorate the risk of investing there are established.

She said that in the wake of the SARS epidemic Taiwanese busi-nesspeople must realize that it would be better to maintain production capabilities and administrative headquarters at home to minimize the risk of doing business in China.

Tsai noted the epidemic had reduced the volume of travel and trade across the Taiwan Strait, with exports to China and Hong Kong falling 34 percent last month from the same period last year.

Tsai identified three challenges facing the nation.

The first is improving the international competitiveness of Tai-wanese businesspeople on both sides of the Strait, the second is to reconsider the long-term goals of cross-strait trade and the third is to speed up economic advancement to give Taiwan an edge over China.

Tsai said the government is also considering steps to further normalize cross-strait financial trades, such as allowing local securities firms to invest in stock brokerages in China. The government may also give permission for Chinese to travel and invest in this country's capital markets, she said.

Tsai didn't give a timetable for implementing these policies. She said there needs to be further discussions on these issues between the council, the Ministry of Finance and the central bank.

To increase the competitiveness of Taiwanese businesses in China, newly-appointed Vice Minister of Finance Yang Tze-kaing (楊子江) said Wednesday that, "It's an inevitable trend for Taiwan to allow OBUs to operate non-deliverable forward [NDF] trades on the yuan."

NDFs are forward foreign-exchange contracts, which allow market participants to take on, or hedge against foreign-exchange exposure in currencies where there may not be access to the local markets, or where access is restricted or complicated.

On Wednesday, Yang had encouraged the banking sector to develop investment-banking services. His comments were echoed yesterday by a seminar participant, who said such a move would bring the sector back on the right track.

"The profit margin of consumer banking services no longer helps sustain the sector's survival," said Wang Heh-song (王鶴松), chairman of the Bankers Association's (銀行公會) research and development committee.

"Local banks should try corporate banking, investment banking and venture-capital businesses," Wang said.

To facilitate the goal, he said that the government should soon raise the capital cap on bank's re-investment projects.

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