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Taiwan, China Two-Way Investment Encouraged

by Mary Swire, LawAndTax-News.com, Hong Kong

01 February 2013


On January 29, at their first meeting to strengthen cross-strait capital market access under the Economic Cooperation Framework Agreement, the China Securities Regulatory Commission (CSRC) and the Taiwanese Financial Supervisory Commission's Securities and Futures Bureau (SFB) agreed to relax significantly present restrictions on securities investment.

For example, Taiwanese securities companies are to be allowed to take majority stakes in Mainland-based joint ventures with Mainland fund management companies, where the current maximum shareholding is 49%; and the CSRC is also to permit those qualified Mainland-Taiwan joint ventures to establish one full-license securities house in Shanghai, Shenzhen and Fujian province, where the maximum Taiwanese shareholding will be 51%.

That liberalization of cross-strait participations should help Taiwanese brokers and fund managers expand into the Chinese market, but it appears that 100% ownership of Chinese subsidiaries will still be impossible.

In addition, the CSRC has agreed to ease the capital requirements for Taiwanese securities brokers to obtain qualified foreign institutional investors status. As brokers in Taiwan have found it difficult to meet the present USD5m asset threshold, China has now agreed, where they form part of a larger investment group, to consider applications on the basis of group assets.

Importantly with regard to Taiwan's competitive position with Hong Kong, the CSRC has also promised to "positively consider" the establishment of a RMB100bn (USD16.1bn) investment limit for Taiwanese houses to invest in Chinese capital markets through the Renminbi Qualified Foreign Institutional Investor program. That limit would be separate from the current RMB270bn limit currently operated by Hong Kong.

To reciprocate, Taiwan has agreed to consider doubling the amount that Chinese institutional investors are allowed to invest in Taiwan's capital market from USD500m to USD1bn, and the FSB will lower the amount of international experience that Chinese securities firms must have to set up representative offices in Taiwan from five to two years. That new regulation will also apply to firms from Hong Kong.

A comprehensive report in our Intelligence Report series giving a country-by-country analysis of offshore investment funds, stock exchanges and trusts, with an analysis of the US QI regime, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report9.asp
TAGS: investment | business | law | capital markets | investment funds | equity investment | China | Taiwan | offshore | Hong Kong | regulation | alternative investment

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