By Shih Hsiu-chuan
The government announced a further loosening of restrictions yesterday on overseas companies with Chinese capital to list on the local stock market, while allowing Chinese qualified domestic institutional investors (QDIIs) to invest in the stock and future markets on a case-by-case basis.
Praising the proposal drawn up by the Financial Supervisory Commission (FSC), Premier Liu Chao-shiuan (劉兆玄) told yesterday’s Cabinet meeting that the Cabinet’s approval was part of the government’s “opening up policy” that targeted “unnecessary restrictions” on cross-strait exchanges.
Commission Vice Chairman Wu Tang-chieh (吳當傑) told a press conference after the Cabinet meeting that the Cabinet agreed to scrap a rule that said China-invested companies could only list in Taiwan if their Chinese shareholders held a stake of 20 percent or less.
The regulations banned companies registered in China with stakes of 20 percent or more held by Chinese investors from listing on the nation’s stock exchange or issuing Taiwan Depository Receipts (TDR) and overseas companies with 40 percent of their net worth invested in China from listing in this country.
Wu said the first restriction would be lifted when Article 20 of the Statute Governing the Relations Between the Peoples of the Taiwan Area and the Mainland Area (兩岸人民關係條例) is amended in the legislature.
“We [the commission] and the Mainland Affairs Council reached a consensus on this. We both wish to see the article revised by October,” Wu said.
He said the other two rules were expected to be removed within one week because they did not require legislative approval.
The Cabinet also decided to allow China’s QDIIs to invest up to 3 percent of their approved funds in the local stock and futures market, even though Taiwan and China still do not have a memorandum of understanding (MOU) that would allow both governments to monitor capital flows.
With the cap, China QDIIs would be allowed to spend up to US$1.125 billion in Taiwan starting in October when the commission finalizes the details of the new regulations.
Wu said there was no need to worry that opening the capital market to China’s QDIIs would allow China to manipulate Taiwan’s stock market because “Chinese QDIIs would only be a trivial amount.”
“The amount of foreign direct investment currently approved by the government is about US$140 billion, or about 32 percent of the market value in the stock market. Even if China’s QDIIs were to pump all of their US$1.125 billion in the stock market, it would still be a very small portion,” he said.
Wu said the government raised the Chinese QDII equity investment ceiling again once it has signed an MOU with China, but he didn’t give a timetable for such negotiations.
The easing of restrictions would make cross-strait capital flow easier and would attract more listings to stimulate and internationalize the market, part of the government’s efforts to turn the country into a funding center in Asia, Wu said.
Also see: Overseas firms plan to cross-list