By April next year, it will be two years since the Taiwan government began to allow Taiwanese banks to establish representative offices in China. So far, as many as eight banks have set up such offices in Beijing, Shanghai, Shenzhen and Kunshan. Two years ago, the reasons cited by the Ministry of Finance (MOF) for giving the go-ahead was that representative offices were not the equivalent of branch banks, since they do not make loan extensions. According to the finance ministry, such offices simply allow the banks to compile and gather credit information of bank customers locally, so as to understand their operations in China.
It seems like it was only yesterday when the ministry uttered these words. However, reportedly the MOF is now actively planning to allow the establishment of branch banks in China. It has even suggested that a certain Taiwanese bank with representative offices there may very well establish a branch there by April next year.
Even more hard to believe is this: in view of the slim likelihood that the two sides of the Taiwan Strait will sign a memorandum of understanding (MOU) to regulate cross-strait financial and banking transactions, the MOF is thinking about relying solely on exchanging correspondence and private visits with its Chinese counterparts to accomplish substantive monitoring of Taiwanese branch banks there. In trying to regulate financial transactions between Taiwan and China without signing a MOU, it is trying to instigate cross-strait direct links by authorizing the private sector to sign aviation pacts without the need to engage in governmental negotiations. After whose interests is the ministry is looking praytell?
Allowing the establishment of branch banks and representative offices in China are two issues that should not be intermingled. Setting up bank branches in a hostile country is an important national security issue. The concerns involved are completely different from those in establishing representative offices. So, none of the reasons cited by the ministry regarding representative offices is applicable. As for whether these representative offices should be upgraded into branch banks, that ought to depend entirely on the degree of goodwill the host country holds toward Taiwan -- and it ought to go through proper scrutiny by Taipei. There is genuinely no need for the MOF to make any hasty decision without proper consultation.
The signing of a MOU on the regulations of financial transactions between two countries is a pre-requisite for exchanging the privilege of opening branches. This is well-established precedent. And there is an even greater need for a MOU in setting up banking operations in an unfriendly country. Everyone knows that there is nothing China won't do to press for localization work in Taiwan and to create the impression in the international community that the "Taiwan issue" is a "domestic issue" of China.
Beijing's insistence on opening up cross-strait links on the condition that Taiwan accepts the "one China" principal is one prime example. More recently, there have been proposals by China for arrangements "comparable to free-trade agreements" between the two sides, which amply demonstrate Beijing's ambition to lure local businessmen with short-term business interests and to trick them into pressuring Taiwan's government.
Naturally, China won't miss the opportunity to make good use of financial and banking institutions and conglomerates eager to expand their businesses and then begin to extort the finance ministry at the drop of a hat. To some extent, the plan has worked, since the MOF apparently no longer insists on the signing an MOU. It is understandable that business enterprises lose their heads for pecuniary profits and gains. But the same may not be said about the government, which supposedly seeks to protect the interests and welfare of all the people.
We also hope that business enterprises can learn to see China in a pragmatic light. While the Chinese market may be gigantic, it is an enemy state of Taiwan after all. One needs to remain on high alert in doing businesses with the enemy. Otherwise, one may well become its hostages. Do not be naive and treat one's foe as a friend. Politics are merciless.
While the communist regime in China has been heavily influenced by capitalism, at its core it still believes in Marxist ideology and class struggle. One's business success there does not guarantee immunity from being purged and placed in exiled later. The existence of a Taiwan that is not unified with China will keep the Taiwanese businessmen affluent and respected in China. If they pressure the government to abandon its claim of sovereignty for the sake of the Chinese market, and willingly reduce the Taiwan issue into a domestic issue of China, the safety of Taiwan will be jeopardized.
Actually, the Chinese market is most definitely not what a certain pro-unification newspaper in Taiwan alleged to be -- a "10 trillion yuan" market. Indeed, the total amount of savings in China is currently about 17 trillion yuan, which is a figure eight times greater than that of Taiwan, but the people ought to also know that just the number of branch banks of the four major Chinese banks round up to around 190,000, which is about 20 times greater than the number in Taiwan. The amount of money deposited in the saving accounts of each bank can be no more than $100 million yuan. This tells us China has a far greater problem than Taiwan when it comes to excessive number of banks.
This is not to mention that the so-called "$10 trillion yuan" market comes to around US$1 trillion -- chump change compared to the economies of the US, Japan and the EU. Taiwanese banks should seek to develop their businesses in these larger economies.
If the operating cash and investments that the enterprises need could be supplied by the local Chinese banks, risks can be shared.After the Taiwanese enterprises put in most or all of the start-up capital, the facilities and operating cash needed subsequently continues to be provided by Taiwanese banks: Taiwan would be shouldering all the risks.
We believe that extreme caution is in order when it comes to policies on loan extensions for investments in hostile countries. It is best to not open the gate wide. Some people believe that the way to the hearts of Taiwanese businessmen and to understand their business operations in China is to have Taiwanese banks extend loans to them. If proponents of this view truly care about the security of Taiwan and where the loyalty of Taiwanese businessmen lays, they should instead advocate to not let Taiwanese businessmen invest in China to begin with and to keep the businesses here through favorable policies. It is simply naive to try to keep Taiwanese businessmen in line with loan extensions.
We hereby advise our government officials to no longer feel mystified by the overwhelming pressure of the business sectors. They should hold their horses on opening up the establishment of branch banks in China; engage in more careful planning and thinking to straighten out their priorities; shift the focus of their policy implementation to service firms doing business in Taiwan and improve the investment environment and tax treatments at home.
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