Taiwan’s regulators plan to renegotiate an agreement to invest yuan in China’s capital markets and separate the pact from the beleaguered cross-strait service trade agreement, according to a senior official.
Financial Supervisory Commission officials will meet China Securities Regulatory Commission representatives in September to negotiate for a Renminbi Qualified Foreign Institutional Investor (RQFII) quota for Taiwan, the commission’s Vice Chairwoman Jennifer Wang (王儷玲) said in an interview on Wednesday. China is expected to seek a new set of terms, Wang said, without elaborating.
China allowed Taiwanese investors to repatriate their yuan via its financial markets more than a year ago as part of a broader trade agreement signed in June last year.
The deal, which would have also opened up banking, hospitals and other sectors across the Taiwan Strait, has languished after the student-led Sunflower movement protests shut down Taiwan’s legislature for more than three weeks earlier this year.
“If we are able to negotiate a new RQFII agreement, we don’t see any implementation issues,” Wang said. “But this type of agreement isn’t as binding as a trade agreement, it’s more subject to change.”
Germany and South Korea received RQFII quotas this year as the world’s second-largest economy continues to push for greater internationalization of its currency. Hong Kong, Singapore, the UK and France already have quotas.
Taiwanese investors had accumulated 290.1 billion yuan (US$46.8 billion) in bank deposits by the end of May, according to the central bank, after lenders began taking such funds last year.
Chinese officials said at a meeting in Taipei in January last year that they were considering a 100 billion yuan quota for Taiwan, which would be greater than amounts granted to other locations, except for Hong Kong’s 270 billion yuan.
Programs such as RQFII would give Taiwanese investors more options to invest in yuan-denominated products, according to Henry Lin (林弘立), the Taipei-based chairman of the Securities Investment Trust and Consulting Association.
Taiwan’s insurance industry had US$497.4 billion in assets under management at the end of last year, according to the commission’s data. In an effort to open up investment avenues for these funds, the regulator has relaxed restrictions on insurers holding foreign currency-denominated assets and could further ease rules on products such as structured notes and foreign-exchange derivatives by the end of this year, Wang said.
“We’d like to see what the insurance companies are buying when they go overseas, and we think that if Taiwan’s financial industry can provide those products, there’s no reason to let others reap the profits,” Wang said.
An incident this year involving products called yuan target redemption forwards, where nine financial institutions were penalized for faulty yuan derivative sales, was “a good lesson,” Wang said, resulting in better client-risk profile assessment procedures within Taiwan’s financial industry.
Taiwan’s limit on Chinese bond issuances will “definitely” be raised this year, Wang said.
“But we aren’t only looking at Chinese issuers,” she said. “We would like Taiwanese companies and other foreign companies to come and issue in Taiwan, too.”
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