A regulation allowing Taiwanese banks to invest in China passed preliminary review in the legislature yesterday amid a chaotic session in which pan-green lawmakers refused to recognize the result.
The legislators said the committee convener had handled proceedings unfairly.
The regulatory relaxation appears to open a door for Taiwanese banks to make inroads into China's financial market through the establishment of subsidiaries, since opening branches is not possible under Taiwanese law because there is no bilateral supervisory agreement.
Eighty four lawmakers endorsed the proposed amendment to Article 36 of the Statute Governing Relations Between Peoples of the Taiwan Area and the Mainland Area (
After passage in yesterday's Home and Nations Committee, the amended article promoted by Chinese Nationalist Party (KMT) Legislator Lee Jih-chu (李紀珠) would be referred to cross-party negotiation before being introduced to the legislature for a second reading.
Lee expected the amendment to finish its third reading within the current legislative session ending in December. Yet the timetable could be delayed for four more months if the pan-green camp demands partisan negotiations before further review, she said.
The amended article allows local banks to set up branches and subsidiaries in China directly or indirectly via a third country and to invest in Chinese rivals.
In addition, the finance sector would be removed from the "prohibited items" for investment in China, and responsibility for the matter would be shifted from the Ministry of Finance to the Finance Supervisory Commission (FSC).
Banks would be required to apply for permission from the FSC before establishing a branch in China, but the FSC would have few discretionary powers. Applicants fulfilling all the relevant criteria would be automatically granted permission, Lee said.
Lee added that it was imperative to pass the amendment if the government really takes the goal of enhancing the competitiveness of Taiwan's banks seriously.
"According to China's WTO commitments, foreign banks can establish wholly foreign-owned branches in any Chinese city and provide local and foreign currency to Chinese individuals. It's time to lift [Taiwan's] restrictions," Lee said.
Taiwanese banks are only allowed to establish representative offices in China, with government officials saying that the ban on opening branches in China is due to a lack of a "memorandum of understanding" (MOU) concerning financial supervision.
Although some pan-green politicians including Democratic Progressive Party Legislator Tsai Chi-chang (
Taiwan Solidarity Union Legislator David Huang (
"Furthermore, it would be a great risk for financial businesses to invest in China without the protection of a MOU and the public would have to shoulder the consequences," Huang said.
Meanwhile, Mainland Affairs Council (MAC) Vice Chairman Johnnason Liu (