No easing on investment in China's financial sector

Government rules on the domestic financial industry's investment in China have not been eased out of concerns about heavy capital outflow, Financial Supervisory Commission Chairman Kong Jaw-sheng (龔照勝) said yesterday.

Kong made the remarks while giving a report on the government's "active management, effective opening" China investment policy at a meeting with the legislative caucus of the opposition Taiwan Solidarity Union (TSU).

Mainland Affairs Council (MAC) Deputy Chairman Johnnason Liu (劉德勳) was also present at the meeting.

In response to TSU Legislator Lo Chih-ming's (羅志明) concern that at least NT$100 billion in capital would leave Taiwan and go to China should the government allow domestic financial companies to invest up to 10 percent of their total assets in China, Kong said that the reports were not true, adding that the government is still mulling relevant issues.

According to Kong, Taiwan banks must meet two basic conditions before gaining the commission's permission to invest in China.

First, the banks must have sound finances and a healthy system. And second, a memorandum of understanding must be signed by the governments on the two sides of the Taiwan Strait, according to the commission's chairman.

Kong also told lawmakers that the representative offices opened by seven Taiwan-based banks in China and a service center run by a Taiwanese insurance company through a joint venture with a Chinese business were not approved by the commission, which was established in July 2004.

As of October 2003, the Ministry of Finance had approved 10 local banks, including the Land Bank of Taiwan (台灣銀行), First Commercial Bank (第一銀行) and Changhwa Bank (彰化銀行), to set up representative offices across the strait.

The ministry also gave the green light to three Taiwan insurers, including Cathay Life Insurance Co (國泰人壽), to establish subsidiaries in China and 14 local insurers to set up 11 representative offices there.

Liu also denied that the MAC has made the proposal to allow a 10 percent cap in total assets for Taiwan financial companies to invest in China, saying only that "it is not an issue for the time being."