MOUs to be signed in Nanjing

The two sides reached the consensus at a preparatory meeting for the cross-strait talks presided over by Straits Exchange Foundation (SEF) Secretary General Kao Koong-lian and Association for Relations Across the Taiwan Straits (ARATS) Vice President Zheng Lizhong in Taipei a day earlier, according to Chang Ming-daw, director-general of the Banking Bureau under the Financial Supervisory Commission.

Because of the complexity of each of the three items, especially the banking part, the two sides decided not to sign the MOUs at the next round of talks between SEF Chairman Chiang Pin-kung and ARATS President Chen Yunlin set for April 26 in Nanjing before holding further negotiations on the issues, said Chang.

Four topics will be included in the Nanjing talks — financial cooperation, augmenting the direct cross-strait charter flights with regular flights, combating crime and opening Taiwan to investment from China, with agreements on the first three issues expected to be signed during the talks.

The agreement on financial cooperation is likely to cover bilateral financial supervision cooperation, the establishment of a currency settlement mechanism, increasing access to each other's financial markets, and the establishment of a system to help Taiwanese businessmen in China to obtain loans, Chang said.

Once a banking MOU is inked, Taiwan's banking and financial industry is expected to post a 20 percent growth for five consecutive years thanks to the potential benefits from wealth management services, including an estimated NT$3,000 billion increase in loan demand, NT$80 billion in net interest revenue and NT$8 billion in service fees, according to a foreign bank with operations in Taiwan.

Local bankers also expressed hope that by signing a banking MOU with China, Taiwan's banking industry will be granted the same preferential treatment offered to their Hong Kong counterparts under the Closer Economic Partnership Arrangement (CEPA) between the special administrative region and China.

The preferential treatment can cover a wide range of areas, such as allowing Taiwan banks to set up branches or subsidiaries in China and provide Chinese yuan services, and relaxing restrictions on foreign insurance companies wishing to set up insurance companies in China, the bankers added.

According to Chinese regulations, foreign banks should set up representative offices for two years before upgrading them to branches or subsidiaries, while foreign insurance companies in China should have operated for over 30 years within any World Trade Organization state with a minimum year-end total asset value of US$500 million and should have established a representative office in China for two years.

Taiwan Federation of Industry Chairman Lee Cheng-chia said the establishment of a currency settlement mechanism should be prioritized during the third round of cross-strait talks and suggested that Taiwan and China authorize the Bank of Taiwan and the Bank of China to handle related business.

Although Taiwan last July authorized some 1,240 local bank outlets to begin exchanges between new Taiwan dollars and the Chinese yuan, with a daily transaction limit of 20,000 yuan per person per day, the supplies of yuan are insufficient and the cost of buying the Chinese currency is too high, as China's monetary authority has yet to promise to provide Taiwan with yuan on a regular basis, according to Lee.

Currently, Taiwan's banks buy Chinese yuan mainly from HSBC and Bank of America.

Therefore, Lee said, building a cross-strait currency clearance mechanism to normalize and systemize the clearance of Taiwanese and Chinese currencies is essential.

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