Taiwan and China yesterday agreed to significantly relax restrictions on bilateral investment to allow securities and futures companies and individuals on either side of the Taiwan Strait easier access to capital markets.
Securities regulators from the two sides announced the plans after a meeting in Taipei as Taiwan and China seek to strengthen financial ties under the Economic Cooperation Framework Agreement.
The planned liberalization would benefit local stock brokerages and fund houses intent on expanding into China as intense market competition in Taiwan squeezes earnings.
“We plan to raise the stake ceiling imposed on Taiwanese fund managers in joint ventures in China to above 50 percent, from the current 49 percent,” China Securities Regulatory Commission Director-General Tong Daochi (童道馳) told a media briefing.
That would allow Taiwanese fund managers to acquire controlling stakes in joint fund houses in China, though full ownership remains untenable.
In addition, Tong said his agency would consider setting up trial zones in Shanghai, Fujian and Shenzhen, where Taiwanese shareholders may own up to 51 percent of securities houses co-funded by Chinese partners.
China will issue licenses to brokerages in the three trial zones so they can conduct different business operations, Tong said.
For brokerages in other trial zones, Taiwanese investors may own a maximum of 49 percent in joint ventures with more than one Chinese partner, as required by current rules, Tong said.
China also pledged to lower capital requirements for Taiwanese brokerages that wish to apply for qualified foreign institutional investors (QFII) status.
“Since many brokerages here fail to meet the threshold of US$5 billion, it is more practical to look at the assets of the entire group instead,” Tong said. “That should facilitate QFII applications.”
China also promised to give investment quotas for Taiwanese seeking to put money into its financial markets under the Renminbi Qualified Foreign Institutional Investor program, Tong said.
To reciprocate, Taiwan agreed to double the amount that Chinese institutional investors are allowed to invest in the local bourse from US$500 million to US$1 billion, said Huang Tien-mu (黃天牧), director-general of the Financial Supervisory Commission’s Securities and Futures Bureau.
The bureau also lowered the number of years that Chinese securities and futures companies must have set up representative offices in Taiwan from five to two, Huang said, adding that the new rule would apply to firms in Hong Kong and Macau as well.
The bureau is also considering allowing Chinese securities companies and individuals to own shares in Taiwanese brokerages, Huang said, without elaborating.
As for Taiwanese companies registered in China being allowed to list in the local bourse, the two sides welcomed the idea and plan to hold more talks this year to work out a supervision mechanism, he said.