Taiwan, China seal financial MOU

Chairman Sean Chen of the Financial Supervisory Commission (FSC) said at a press conference in the evening that the exchanging of the signed copies of the MOU was completed at around 6:00 p.m. with the MOU expected to take effect in two months.

He said the MOU was in two versions- one using standard traditional Chinese characters and the other being in the simplified version of Chinese used in China. There was no English-language version as previous MOUs that Taiwan have reached with other nations. The titles of the signatories of the documents were written as chief financial supervisors on the two sides, removing the need to feature government position titles in order to avoid possible political or sovereign controversies, he said.

Chen confirmed that he signed the document for the “Taiwan side” with his counterpart representing the “China side.”

The terms and measures in the MOU cover cooperation on monitoring operations involving banking, securities, futures, and insurance services.

Both sides also agreed to take steps to enhance the exchange of financial information, establishment of financial institutions on both sides, a mechanism dealing with possible financial crises, personnel training, and other interchange activities.

Most foreign investors hailed the MOU as a long-term positive step for the development of the Taiwan financial market with the anticipation of greater inflow of capital, although some executives at international securities firms cautioned that the anticipated eventual sealing of the vital document could trigger profit-taking by some stock investors in the short term.

The weighted Taiwan shares price index surged 127.05 points or 1.66 percent to close at 7,792.68, the highest level so far this year.

The financial sector was among the major gainers while the market was also boosted by the announcement of flat-panel monitor maker Innolux Display's merging with Chi Mei Optoelectronics over the weekend.

Finance experts said the MOU marks the liberalization of the financial markets for each other in Taiwan and China.

The eight Taiwan banks that have maintained representative offices in China are expected to upgrade their status to branches or subsidiaries in order to take deposits of Chinese currency.

They expect Taiwan financial institutions, including securities firms, will have an advantage over international firms in using a common language with China although Taiwan companies were rather late in entering the huge Chinese mainland market due to the stalling by previous administrations.

They said the formal signing of the financial MOU will help lend impetus to the bilateral talks on a proposed economic cooperation framework agreement (ECFA) between Taipei and Beijing.

Yang Yi, spokesman of China's Taiwan Affairs Office said in Beijing the MOU marks a new chapter in the practical financial cooperation between the two sides.

He said the MOU is a major step taken under the framework of a financial cooperation signed in Beijing in late April in China's Nanjing City.

The MOU will be instrumental to the complementing effects between Chinese and Taiwan financial institutions, Yang said.

Taiwan companies in China will benefit from the improved financial environment for financial support, he pointed out.

Lending from Chinese banks to investors from Taiwan presently accounts for only about 30 percent of loans mainly because of the banks' restrained capability for credit investigation.

But this provided adequate for the business opportunities for Taiwan banks, according to some financial analysts.

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