Taiwan's edge in Chinese free trade zone: financial regulator
CNATAIPEI -- Taiwan's offshore banking units (OBUs) will have an advantage in the soon-to-be launched Shanghai free trade zone, the country's financial regulator said, dismissing concerns that the OBUs would lose business to the zone.
September 10, 2013, 12:04 am TWN
Financial Supervisory Commission Chairman Tseng Ming-tsung said Taiwan's offshore banking units (OBUs) have been developed for a long time and the Taiwanese laws governing them are strict and comprehensive.
The Shanghai free trade zone has also invited Taiwan's banks to set up branches there, Tseng said, and with their experience, they will have considerable advantages there.
According to drafts of the plan for the new Shanghai free trade zone shown to foreign media on Thursday, the zone will allow wider conversion of China's currency.
The zone, expected to be launched on Sept. 27, will allow convertibility of the yuan on the capital account for the first time, “under the pre-condition that risk can be controlled,” according to AFP.
The draft plan would also allow interest rates to be set by the market.
Some Taiwanese bankers worried that the new zone would marginalize their OBUs, which currently offer a full range of yuan-denominated services, including loans and trade settlements.
One banker told the United Daily News that the main advantage of the new trade zone was that it is “free,” and he worried that the zone's financial sector would be liberalized to a greater extent than for OBUs, which could make it harder for them to compete.
The new zone, which is seen as an attempt to turn Shanghai into an international trade and financial center, could also challenge Hong Kong's status as China's leading financial hub.
But a banking official in Hong Kong said Friday he was not worried about the new free trade zone.
Andrew Fung Hau-Chung, executive director of Heng Seng Bank, said that in addition to policy, the free trade zone would also need to achieve a certain scale and develop a settlement system before it could thrive.
Because it will take three to five years to build, the zone will not challenge Hong Kong's status in the short term, Fung said.
Even if Shanghai does emerge as an international financial center, Fung said, that does not mean Hong Kong could not co-exist with it.
The banker noted that the Chinese yuan is now the ninth most traded currency in the world, the first time it has made it into the top 10, reflecting its growing recognition and use.