With Taiwan and China reaching agreements to allow banks better access to each other’s markets, as well as SinoPac Financial Holdings Co entering into a private placement with Industrial and Commercial Bank of China (ICBC) to allow the latter to acquire a 20 percent stake in the Taiwanese company or in its banking unit, people have turned their attention to whether the cross-strait financial exchange can move forward on a solid basis and if the government knows that diversification beyond China is imperative.
Under the agreements reached between Taiwan’s Financial Supervisory Commission (FSC) and its Chinese counterpart, the China Banking Regulatory Commission (CBRC), Taiwan would offer Chinese investors opportunities to hold higher shareholdings in Taiwanese financial institutions; China would facilitate Taiwanese banks to set up more subsidiaries or branches in China; and both sides would move to ditch the OECD prerequisites for reciprocal branches or investment in bilateral markets.
For years, banks on both sides of the Taiwan Strait have called on governments to treat them at least as well as other foreign banks and maybe better. Last week’s agreements showed that the regulators on both sides have taken banks’ concerns to heart, and the relaxed rules indicated expanded investment for first-tier banks in both countries, as well as opportunities for more second-tier banks to tap into each other’s markets.
Although many of the agreements were reached in accordance with market expectations and within the cross-strait Economic Cooperation Framework Agreement (ECFA), Taiwan’s agreeing to Chinese banks holding a higher shareholding in its banks was a policy breakthrough and could indicate a watershed for cross-strait financial exchanges.
Under the relaxed rules, a Chinese lender can choose to invest in a Taiwanese financial holding company or its banking units, but not both; a Chinese bank can buy up to 10 percent of a listed Taiwanese financial holding company, up to 15 percent of an unlisted financial holding company and 20 percent of a banking subsidiary of a listed Taiwanese financial holding company.
China already allows Taiwanese banks to hold stakes of up to 20 percent in Chinese banks, so that Taiwan’s relaxed limits on Chinese banks adhere to the principle of reciprocity. Once both governments give their approval to SinoPac selling shares to China’s ICBC, this deal could allow the Taiwanese firm to further build up operations in China, and strengthen its yuan-denominated business at home.
It remains unknown whether other banks will follow in the steps of the SinoPac-ICBC move, but there are already growing worries in Taiwan about whether Chinese banks will pursue stakes in Taiwan’s state-run banks and if they will seek seats on the boards of Taiwanese banks, given that most of Chinese banks’ interest in Taiwanese lenders results from political considerations, rather than commercial interest.
As a result, the government must keep in mind that the main strategy behind facilitating Taiwanese banks to engage Chinese strategic partners is to help them expand business to the large number of China-bound Taiwanese businesspeople, as well as to develop the Chinese market; someone in the government must assure that allowing Chinese banks to have higher stakes in Taiwanese banks remains just a supplementary measure.
As far as the management control in Taiwanese banks and share sales in Taiwan’s state banks are concerned, the government should stick to its bottom line and refrain from making more concessions in the upcoming service sector negotiations under the ECFA, during which further relaxations of financial rules may be agreed upon. Moreover, in the wake of signs that many businesses are starting to relocate their operations to other emerging markets because of rising production costs in China, we must hope our government will be able to reach similar market-access deals with other countries and thus help prepare more Taiwanese banks to enter those markets.
With its passing of Hong Kong’s new National Security Law, the People’s Republic of China (PRC) continues to tighten its noose on Hong Kong. Gone is the broken 1997 promise that Hong Kong would have free, democratic elections by 2017. Gone also is any semblance that the Chinese Communist Party (CCP) plays the long game. All the CCP had to do was hold the fort until 2047, when the “one country, two systems” framework would end and Hong Kong would rejoin the “motherland.” It would be a “demonstration-free” event. Instead, with the seemingly benevolent velvet glove off, the CCP has revealed its true iron
At the end of last month, Paraguayan Ambassador to Taiwan Marcial Bobadilla Guillen told a group of Chinese Nationalist Party (KMT) legislators that his president had decided to maintain diplomatic ties with Taiwan, despite pressure from the Chinese government and local businesses who would like to see a switch to Beijing. This followed the Paraguayan Senate earlier this year voting against a proposal to establish ties with China in exchange for medical supplies. This constituted a double rebuke of the Chinese Communist Party’s (CCP) diplomatic agenda in a six-month span from Taiwan’s only diplomatic ally in South America. Last year, Tuvalu rejected an
US President Donald Trump on Thursday issued executive orders barring Americans from conducting business with WeChat owner Tencent Holdings and ByteDance, the Beijing-based owner of popular video-sharing app TikTok. The orders are to take effect 45 days after they were signed, which is Sept. 20. The orders accuse WeChat of helping the Chinese Communist Party (CCP) review and remove content that it considers to be politically sensitive, and of using fabricated news to benefit itself. The White House has accused TikTok of collecting users’ information, location data and browsing histories, which could be used by the Chinese government, and pose
US President Donald Trump’s administration on Friday last week announced it would impose sanctions on the Xinjiang Production and Construction Corps, a vast paramilitary organization that is directly controlled by the Chinese Communist Party (CCP) and has been linked to human rights violations against Uighurs and other ethnic minorities in Xinjiang. The sanctions follow US travel bans against other Xinjiang officials and the passage of the US Hong Kong Autonomy Act, which authorizes targeted sanctions against mainland Chinese and Hong Kong officials, in response to Beijing’s imposition of national security legislation on the territory. The sanctions against the corps would be implemented