The government’s plan to sign a memorandum of understanding (MOU) with China will have an impact on the nation’s financial security mechanism and confidential business information on capital flows between the two sides of the Taiwan Strait.
Former Financial Supervisory Commission chairman Shih Jun-ji (施俊吉) has expressed his opinion on the matter, saying that “every issued loan is a risk to financial institutions” and asking how the government would be able “identify the quality of risk for Taiwanese businesspeople in China.”
However, “for China,” Shih said, “the signing of an MOU will solve all problems.”
If Chinese financial institutions are allowed to set up a branch in Taiwan, they will be able to access all the credit data collected and systematized by the Joint Credit Information Center in Taiwan over many years.
If that happens, every Taiwanese-owned company in China that originated in Taiwan will have its financial information exposed.
Even more worrying is that China would be able to use this credit information to threaten or tempt some Taiwanese companies to engage in activities that could jeopardize Taiwan’s national security.
Strictly speaking, an MOU is not legally binding like an agreement or treaty. However, given that Taiwan and China have dedicated time and effort to negotiate and sign an MOU, both parties are likely to closely observe the regulations and provisions listed in the MOU.
Some people have proposed imposing restrictions on the use of credit data be introduced in the MOU. This, however, is a naive idea.
China has become an economic powerhouse that politically covets sovereignty over Taiwan’s territories, strongly opposes independence and is intent on promoting unification. Non-economic factors will inevitably become involved in what are purely financial or economic issues.
Furthermore, given the serious imbalance in cross-strait information transparency, investing in China would seem like an adventure into the unknown for Taiwanese financial institutions while Chinese financial companies receive a warm welcome from the administration of President Ma Ying-jeou (馬英九) when they invest in Taiwan.
David Smick, a well-known international financial adviser who is well acquainted with the heads of central banks around the world, recently published a book entitled The World is Curved: Hidden Dangers to the Global Economy.
Smick says in the book that in the world of financial markets, the world is not flat, but curved.
He says we cannot see the dangers beyond the horizon because of the lack of financial market transparency, therefore we cannot always identify risks.
Smick writes that China’s attempt to combine a market economy with a Marxist regime is asking too much, and that while China is capable of bringing the world into a new era of prosperity, it could also drag us all into chaos.
The Ma government has always depended on Chinese measures as painkiller and aphrodisiac and given us the false impression that the establishment of a cross-strait mutual market will bring about prosperity.
Is the government fully aware of the serious repercussions of signing an MOU with China?
Hong Chi-chang is a former chairman of the Straits Exchange Foundation and a former Democratic Progressive Party legislator.
TRANSLATED BY TED YANG