POLICIES RELAXED TO IMPROVE ECONOMIC RELATIONS BETWEEN TAIWAN AND CHINA
New rules adopted recently by Taiwan’s Executive Yuan are expected to greatly improve economic relations between Taiwan and China. The changes include direct cross-strait weekend charter flights, direct exchange of China’s renminbi (RMB) currency in Taiwan, and a relaxation of cross-strait securities investment.
Following the agreement on direct weekend charter flights reached on 13 June 2008, flights started on 4 July. Five domestic carriers, including China Airlines, are operating these flights at present, along with six Chinese airlines. In Taiwan, the flights are operating from airports in Taoyuan, Taipei (Songshan), and Kaohsiung, while in China, flights are operating from Beijing, Shanghai, Xiamen, Guangzhou, and Nanjing. Some of these weekend charter flights are bringing Chinese tourist to Taiwan.
Direct Exchange of Renminbi Currency Offered in Taiwan
To accommodate the increasing travel across the Taiwan Straits, Taiwan’s Legislative Yuan has passed a revision of Articles 38 and 92 of the Act Governing Relations Between the Peoples of the Taiwan Area and the Mainland Area, providing that the Taiwanese as well as Chinese travelers in Taiwan may exchange Chinese renminbi (RMB) currency at financial institutions designated by the Central Bank, effective from 30 June 2008.
The Central Bank has authorized related currency exchanges at certain financial institutions, including the Bank of Taiwan, Mega Bank, the Land Bank of Taiwan, the Cooperative Bank of Taiwan, the First Bank, Hua Nan Commercial Bank, and Chang Hwa Bank, as well as at many tourist sites and temples. The banks will determine the posted exchange rate respectively.
Investment Policy Relaxed for Five Types of Securities
Taiwan has relaxed its policy on five types of securities investments, as follows:
(1) Foreign fund investment institutions no longer need to produce a statement regarding the origin of their funds,
(2) A second listing in Taiwan by enterprises listed on the Hong Kong Exchange has been opened to a limited extent,
(3) Fund investment in Chinese shares, China-related Hong Kong and Macao shares, and H shares has been relaxed. To relax investment in Chinese shares by overseas and domestic funds, the government has reviewed the ratio restrictions on such investments and has decided to greatly expand the ratio of a fund’s net worth that may be invested in Chinese shares, from 0.4% now to 10%. All restrictions will be lifted from investment on China-related Hong Kong and Macao shares as well as H shares. It is expected that this will give fund managers greater latitude in their investment targets, and will allow funds to allocate their assets in a more flexible manner.
(4) Investment in Chinese securities futures will be allowed following revision of the relevant law. The opening of indirect Chinese operations to securities houses will be carried out, with Taiwanese securities companies being permitted to participate in Chinese securities houses, fund management companies, and futures firms through overseas subsidiaries at a ratio of 20% of their net worth, up from the current 10%. The investment ceiling of 25% of shares already issued by the Chinese investment companies will also be eliminated, and
(5) The mutual listing of Taiwan and Hong Kong exchange-traded funds (ETFs) will be permitted by the end of the year at the earliest.
Taiwan’s Executive Yuan has raised the ceiling on investment in China by medium-sized and large Taiwanese enterprises to a uniform 60%, effective in August 2008. The investment ceiling will be completely eliminated for the Taiwan subsidiaries of multinational enterprises and for enterprises that have established operations headquarters in Taiwan.
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