Wed, Nov 05, 2003 - Page 11 News List

China can learn from Taiwan

BANKING Financial experts told a cross-strait seminar that Taiwan's 40-year experience in the stock exchange could serve as a valuable lesson for China's greener investors

By Joyce Huang  /  STAFF REPORTER

The maturity of finance and capital markets in Taiwan is decades ahead of China, providing the emerging market on the other side of Taiwan Strait with abundant lessons and expertise to learn from, financial experts said yesterday at a seminar held in Taipei.

"Taiwan has over 40 years of stock-exchange experience while China has 11 years, yet Chinese [capital] markets may be leapfrogging the cross-strait financial gap," James Wei (魏哲楨), president of Taiwan International Securities Corp (金鼎證券), said at a seminar focusing on cross-strait financial exchange.

Despite the financial gap between Taiwan and China, it's still premature to proceed with cross-strait financial integration since "it'll take another three to five years before China can facilitate the soundness of its finance and capital markets," Wei said.

Sean Chen (陳沖), chairman of Taiwan Stock Exchange Corp, said Taiwan boasts lots of experience that China can learn from. For instance, China is inheriting part of Taiwan's qualified financial institutional investors (QFII) mechanism, which Taiwan announced the scrapping of in October after a 13-year practice, Chen said.

At yesterday's seminar, organized by the Taipei Foundation of Finance and the China Society for Finance & Banking (中國金融學會), visiting Chinese bankers expressed no opposition to opinions expressed by their Taiwanese counterparts.

China officially kick-started its QFII mechanism five months ago and has so far approved nine foreign institutional investments, valued at US$1 billion with a 0.6 percent weight in China's stock market, said Chen Dong (陳東), vice director of China Galaxy Securities Co's (中國銀行證券) research center.

To further compare the imbalanced development of the QFII mechanism across the Strait, Francis Yu (於貽勳), managing director of UBS Securities Ltd, Taiwan (瑞銀證券), said Taiwan had approved a total of 813 foreign institutional investments, values at US$51.3 billion, at the local stock market before the government scrapped the QFII mechanism in October.

The investment by QFII accounted for 23.3 percent of Taiwan's stocks, Yu added.

China also lagged behind Taiwan in its financial supervisory system and the establishment of financial holding companies (FHCs) since there are 14 FHCs in Taiwan, yet only one semi-FHC in China.

But both capital markets may be competing fiercely for China-based Taiwanese businesses to become listed companies, Wei warned.

He said that stocks in Taiwan's stock markets still enjoy advantages of high price-to-earnings ratios and liquidity, which cost businesses less to go on trading. But he expressed concern that Chinese stock markets may catch up to attract to-be-listed Taiwanese companies and, therefore, urged the government to open up the policy as soon as possible.

Because of the termination of official cross-strait dialogue, yesterday's seminar, provided a rare chance for both sides to ponder cross-strait financial cooperation.

In his address, Liu Tinghuan (劉廷煥), vice president of China Society for Finance & Banking, said that Chinese authorities have given their approval to four Chinese banks -- China Merchants Bank (招商銀行), Shanghai Pudong Development Bank (上海浦東發展銀行), Industrial and Commercial Bank of China, Asia (工銀亞洲) and Industrial Bank (興業銀行) in Fujian -- to set up liaison offices here in Taiwan.

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