New ‘one China’ glitch in direct cross-strait financial dealings

The China Post staff

Direct financial transactions between banks in Taiwan and their counterparts in mainland China ran into a new hitch as a leading bank in Beijing requires that Taiwan banks back the mainland’s “one China” principle. The Ministry of Finance (MOF) yesterday issued a decree to prohibit banks in Taiwan from signing financial transaction agreements with any mainland counterparts if their pacts contain provisions referring to Beijing’s “one China” principle.

The new quandary erupted only days after the People’s Bank of China — the central bank of Beijing — gave approval to financial institutions to offer direct financial dealings with the offshore banking units (OBUs) of Taiwan banks.

Banks in Taiwan said they have just completed the exchange of secret financial transaction codes under the international SWIFT system with their counterparts in the mainland. But the MOF has received reports that Beijing’s Bank of China (BOC) has added the words of recognizing Beijing’s “one China” principle in the formal agreements to be signed by banking partners in Taiwan. Please see DIRECT on page

The MOF blamed Beijing for the new snag and urged the mainland not to mix financial affairs with politics since it will only harm the interests of people and enterprises on both sides. Vice Finance Minister Chang Hsiu-lien said it is regrettable that BOC, one of the largest banks in mainland China, has mixed politics with commercial affairs by demanding Taiwan banks intending to forge direct remittance ties with it sign agreements that bear provisions recognizing Beijing’s “one China” principle.

Noting that direct remittances across the Taiwan Strait are mainly commercial exchanges, Chang said the People’s Bank of China should not try to complicate such relations by making politically motivated demands.

To date, Chang said, no Taiwan banks have signed any such accords with the mainland central bank.

The People’s Bank of China recently agreed to allow the four largest state-owned commercial and specialized banks on the mainland to conduct direct remittances with the OBUs of Taiwan banks. But BOC is the only bank that inserted the “one China” principle in its agreement. Taiwan bank executives reported three other banks — Agricultural Bank, Industrial and Commercial Bank, and Construction Bank — do not have any such a clause in the contracts drawn up by them. The “one China” principle, as insisted by Beijing, is the major stumbling block for Taipei and Beijing to resume the long-stalled formal dialogue. The two sides still disagree on the exact “one China” definition and which represents the “one China.” Taipei is concerned that acceptance of such term will cost its sovereignty and relegate it to a local-level government. In view of the demand from BOC, Vice Minister Chang said the MOF plans to temporarily shelve the new moves to allow more Taiwan banks to set up representative offices in the mainland. The timetable to let mainland banks to open offices in Taiwan will also be affected as a result. Chang said the it is not necessary for the mainland to take such “petty actions.” She added the mainland should be held responsible for any negative effects on the obstruction of financial interchange across the Taiwan Strait. Most senior executives at local banks acknowledged the BOC’s move could inhibit the scope of cross-strait financial cooperation.

But some of them said they can still circumvent the problem by forging cooperative ties with other mainland banks to serve their clients in Taiwan and working on the mainland.

Executives of Chang Hwa Commercial Bank said the bank’s direct remittance with the mainland will not be undermined despite the unsigned cooperation agreement with BOC.