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200 Taiwan Development Perspectives 2009
The deregulation observed in cross-strait economic
and trade exchanges indicates Taiwan and China
have favorable opportunities to make considerable progress
on the negotiations of an MOU in the area of financial
supervision. Taiwan’s banks and securities
firms are very likely to start up their business in China
and on the other hand, China QDII may be able to obtain
authorized access to Taiwan’s capital market at an
earliest possible date. The MOU will be an important
milestone for the establishment of a sustainable partnership
in developing Taiwan and China as the regional
financial center in Asia and the Pacific.
Besides, China is willing to further strengthen the
economic and trade relationship with Taiwan after the
Beijing Olympic Games of 2008 and to listen to suggestions
from Taiwan businessmen. Wang Qishan,
Chinese vice premier, suggested on August 28, 2008,
that Taiwan and China could consider organizing a
common market. It was the first time a top leader of the
People’s Republic positively responded to the idea of a
common market across the Taiwan Strait, first broached
by Vincent Siew, vice president of the Republic of
China. The advantages of a common market are obvious.
Leaders in Taiwan even suggest the proposed
common market cover the whole of China, including
Hong Kong in a joint effort to organize a regional network
of funds, talents, and merchandise trade.
It was agreed at the Cross-Strait Economy, Trade
and Culture Forum on April 9, 2007, exchanges in the
areas of children’s education, elementary education,
vocational training, and continuous education shall be
carried out comprehensively. Academic cooperation in
various fields – such as instructor exchanges, research,
training, or scientific study between the schools of both
sides – shall be greatly promoted. To cultivate professional
talents and trainers for the financing industry,
cross-strait cooperation in training and testing for professional
certifications shall also be enhanced.
The cross-strait weekend charter flights, which
were successfully launched on July 4, 2008, have
brought forth tremendous improvement in air transport
between China and Taiwan. In addition, as the NTD
and the RMB can be mutually converted at local banks
on each side, the exposures of associated exchange
risks are thus decreased to a lesser degree. On the other
hand, however, while the people enjoy the benefits of
direct conversion between the NTD and the RMB, the
banks might take the risks arising from holding excessive
currency issued in China or Taiwan. How to resolve
the problem of excessive currency holdings and
reduce the capital costs for banks as well as the currency
conversion cost for the public would be a major
challenge we need to cope with in developing a sound
system for cross-strait currency exchange.
The establishment of a monetary settlement system
for the Hong Kong dollar (HKD) and the RMB has
enabled Hong Kong to develop RMB call-loan markets.
In other words, through the monetary settlement system
established by the joint efforts of the Hong Kong Monetary
Authority and the People’s Bank of China, Hong
Kong can convert the RMB surplus (from the currency
exchange settlements) into other foreign currencies,
such as U.S. dollars. Taiwan’s Central Bank and the
People’s Bank of China may follow Hong Kong’s example
for the establishment of a cross-strait monetary
settlement system. Currently, China appoints the subsidiary
of B.O.C (Bank of China) as the primary bank
handling currency settlements in Hong Kong.
After direct remittances are allowed across the
strait, the general public and enterprises on both sides
can use the NTD or the RMB as the currency of remittance
for cross-strait payment. In that case, the associated
exchanges risks and handling charges will be reduced
by 50 percent, as only one currency conversion is
necessary to complete the transaction.
If the commercial banks in Taiwan and China are
allowed to accept NTD as well as RMB deposits, the
China Union Pay Card and any credit cards issued by
Taiwan banks can be used as authorized payment vehicles
on either side of the strait. Direct wire transfers
across the strait can be made through the bank accounts
of the trading parties on both sides as well. For Taiwan