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Failure to clear trade pact will hurt financial sector: official

TAIPEI -- If a service trade pact with China fails to clear the Legislature, it will impact the financial sector in four areas, including a drop in interest rates of renminbi deposits, the head of the Financial Supervisory Commission (FSC, 金管會) said. In an interview with a local TV station, FSC Chairman Tseng Ming-chung (曾銘宗) noted that currently, renminbi interest rates can reach as high as 3 percent, but if the renminbi deposits cannot be absorbed in other ways, such as through bonds, the interest rates will drop.

Taiwan's goal of developing into an offshore center for renminbi will also be affected, he said.

Chinese-yuan denominated deposits in Taiwan's banking system had reached 247 billion yuan (US$40.2 billion) as of the end of February, setting a new high, according to the Central Bank of the Republic of China. Secondly, Taiwan's financial institutions' efforts to reach out to China will be hindered.

Thirdly, the FSC is currently negotiating with its Chinese counterpart on establishing a supervisory platform, and the stalled pact will affect such talks, he said.

Tseng said the FSC has been soliciting China to grant Taiwan treatment over and above its commitment under the World Trade Organization, adding that this is why South Korea and Hong Kong are soliciting the same treatment given to Taiwan.

Lastly, he said, the failure to pass the trade-in-services agreement will affect the performance of Taiwan's stock market, as evidenced by recent drop of financial stocks.

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