Taiwan stands to gain from 'Formosa bonds' policy: FSC
By Ted Chen ,The China Post
December 21, 2013, 12:07 am TWN
TAIPEI, Taiwan -- In aiming to allay recent concerns over the issuance of “Formosa bonds,” the Financial Supervisory Commission (FSC, 金管會) yesterday provided a lengthy report to the media, saying that Taiwan's economy and enterprises stand to gain more benefits than harm from the instrument.
According to the FSC, Formosa bonds will significantly aid in digesting the staggering inflows of renminbi into Taiwan. Currently, the pool of renminbi in the Taiwan market has swelled to 150 billion yuan, or a NT$742.5 billion benchmark. The Formosa bonds will serve as a channel for the Chinese currency to flow back to its origin across the strait, and reduce the amount of idle hot money in Taiwan while stabilizing exchange rates, said the FSC.
The proliferation of international bonds such as the Formosa bonds will help develop Taiwan's investment environment, providing financial institutions with more options and opportunities, said the FSC. Most notably, trading of the fledgling instrument will help propel Taiwan into one of the world's leading destinations for the offshore clearing of renminbi while allowing the local financial sector to foster more new talent for the endeavor.
The Formosa bonds also represent an important addition to Taiwan's bond market, and an important investment option for local financial institutions, said the FSC.
The FSC also reiterated that it has been monitoring the issuance of Formosa bonds by Chinese banks. In every instance, the total amounts of bonds and their related terms such as interest rates have been scrutinized to ensure competitive fairness, assured the FSC. Practices that harm Taiwan's industries will be deterred, said the regulator.
The instrument also enables the China-based subsidiaries of Taiwanese enterprises including banks to seek capital required for expansionary endeavors.
Meanwhile, Wu Sou-shan (吳壽山), chairman of Gre-Tai Securities Market (櫃買中心) on Thursday spoke in support of the Formosa bonds, saying that the mechanisms of the free market should be respected. In addition, the instrument will greatly help in bridging the gap between the local and international bond markets, which will also propel Taiwan's profile among leading international financial hubs including Hong Kong, Singapore, and London.