The Chinese mainland and Taiwan are expected to ink a memorandum of understanding (MoU) on cross-Straits financial supervision in the first half of next year, which will allow the island's lenders and securities firms to tap the mainland's financial market.

"The MoU will cover regulatory cooperation on the banking and securities sectors," Susan Chang, chairperson of Taiwan Financial Holdings, said in a symposium attended by leading financial institutions and officials from both sides of the strait.

The MoU is expected to allow financial regulators from the mainland and the province to set up offices in each other's turf. Once the offices are in place, banks and securities firms from the island will be allowed to set up sub-branches and subsidiaries on the mainland. In addition, they will also be able to buy stakes in local financial institutions.

Presently, Taiwan firms from both sectors are only allowed to operate representative offices on the mainland, and are barred from issuing loans.

"Once the details of the MoU are confirmed, we will start to study investment opportunities on the mainland," said James Wei, chairman of Taiwan International Securities Investment Consulting Corporation.

"Despite the current downturn, the mainland's stock market is still attractive in the long run."

It may still take a year for both sides to negotiate the details on how to regulate financial institutions. Following that, the two sides will discuss the rules for allowing the mainland's financial institutions to enter Taiwan's market.

The MoU is expected to be the next step of cross-Straits exchange and cooperation. Earlier this month, the two sides reached agreements on direct air and sea transportation links, postal service, and regulatory cooperation to improve food safety.

Merchandise trade between the two sides is around US$120 billion.

(China Daily November 26, 2008)