Thu, Jun 15, 2006 - Page 11 News List

Banking veterans call for indirect investment control

By Amber Chung  /  STAFF REPORTER

Banking veterans yesterday called on the nation's financial regulator to hammer out an indirect supervisory cooperation mechanism with China via a third territory in a bid to bypass the regulatory stalemate across the Taiwan Strait.

"One of the major hurdles to opening up the banking sector on both sides of the Strait is the absence of a cross-strait financial supervisory mechanism," said Victor Kong (龔天行), president of Fubon Financial Holding Co (富邦金控).

If a formal bilateral agreement is not available in the foreseeable future, it should be possible to arrange indirect supervision through substantial exchanges of information via a third territory like Hong Kong, he said.

This could also help Taiwanese banks expand into China, he said.

Kong made the remarks at a discussion held by the Financial Supervisory Commission yesterday ahead of a planned national conference on sustainable economic development sometime next month.

Kong also called on the commission to approve Taiwanese banks' expansion in China through their subsidiaries, or to allow investment in Chinese lenders.

Fubon has long been looking to gain a foothold in China via its Hong Kong-based subsidiary Fubon Bank (Hong Kong) Ltd (香港富邦), and hopes to establish branches across the Taiwan Strait while investing in Chinese lenders.

However, Taiwanese companies and banks' indirect investment in their Chinese counterparts via their overseas affiliates remains subject to regulations of the Statute Governing Relations between Peoples of the Taiwan Area and the Mainland Area (兩岸人民關係條例).

In response, the commission's acting chairman Lu Daung-yen (呂東英) said that such indirect supervisory cooperation might be feasible if the Mainland Affairs Council gives its approval.

The meeting yesterday focused on the theme of developing Taiwan as a wealth management hub and making it easier for local companies to gain access to foreign investment, as the government aims to reverse capital outflows that could amount to as much as US$9 billion annually amid a continuing trend of industrial migration.

"Yet the market is indivisible under globalization. If Taiwan wants to be a regional funding center, it cannot exclude the China market," said Luo Huai-jia (羅懷家), executive director of the Taiwan Electrical and Electronic Manufacturers' Association (電電公會), which represents more than 4,000 manufacturers.

Luo urged the government to raise the regulatory ceiling that caps China-bound investment at a maximum of 40 percent of the Taiwanese firm's net value, calling it an outdated regulation that had led to non-reported fund outflows to China through other places.

The relaxation can help lure China-based Taiwanese firms, which are queuing up to make their initial public offering in Hong Kong, back to their home market for funding, he said.

Relaxing taxation on inheritance and gift taxes, which have caused an

estimated US$800 billion to be parked overseas, is necessary if Taiwan wants

to become a wealth management hub like Hong Kong and Singapore, which earned

their status after tax relief efforts, Luo said.

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