CBC keeps close eye on foreign accounts

During a legislative session, the head of the Central Bank of the Republic of China (Taiwan) said the island had US$2.45 billion of foreign capital inflows from the beginning of the year to March 15, and urged investors to ensure the money is used for its stated purpose.

Flows into the 5,000 accounts held by foreign investors have totaled US$290 billion in the past 14 months, he said.

“Of those, 20 accounts had very active capital flows and contribute 40 percent of the US$290 billion total flows,” the governor said. “These funds didn't buy stocks. Instead they park in government bonds, in securities lending and in Taiwan dollar savings accounts.”

Perng in October expressed concern that foreigners had about NT$500 billion in Taiwan dollar accounts, five times more than policy makers considered acceptable. In November, Taiwan banned overseas investors from placing funds in time deposits and in January set a one-week deadline for money brought in to be invested or repatriated, measures aimed at limiting currency appreciation that may hurt exports.

“We'll closely monitor the situation,” Perng said.

Also during the session, Perng refused to discuss when the bank will raise interest rates.

He was responding to a lawmaker, Lin Teh-fu, who cited Taiwan's scholars as speculating that the central bank will raise interest rates in the third quarter at the earliest, and that the bank may raise rates following a similar move by the U.S. Federal Reserve.

“These are only speculation by scholars,” Perng noted. “There's no reason Taiwan should follow other countries in making its monetary policy. We'll decide our monetary policy at our next meeting in March 25.”

He also lauded Taiwan banks for launching policies to curb property speculation.

These policies include: lowering the amount of loans to investors and luxury home buyers from 80 percent of the total value of property to 70 percent, raising interest rates on these loans, and revoking a grace period in which only interest payment is made.

“We're satisfied with these measures,” Perng said.

He also said Taiwan isn't facing an asset bubble, “except for certain areas” where property values are overly high.

The best way to correct this, he said, is to increase supply, citing as an example the government's plan to build low price housing in Linkou Township, Taipei County.

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