Taiwan claims banking edge in Shanghai FTZ

Will not lose banking business to the FTZ.

Taiwan's Financial Supervisory Commission, the financial regulator, said Taiwanese offshore banking units have an advantage in the soon-to-be launched Shanghai free trade zone, dismissing concerns the OBUs will lose business to the zone.

FSC Chairman Tseng Ming-tsung said Taiwan's OBUs have developed for a long time and the Taiwanese laws governing them are strict and comprehensive. Tseng said the experienced Taiwanese banks will have considerable advantages in the FTZ.

Some Taiwanese bankers are worried that the FTZ will marginalize their OBUs, which currently offer a full range of renminbi-denominated services, including loans and trade settlements.

Others are concerned that the FTZ’s financial sector will be liberalized to a greater extent than for Taiwanese OBUs, which could make it harder for Taiwan to compete.

The FTZ, which will be launched on Sept. 27, has invited Taiwan's banks to set up branches there. China plans that the Shanghai FTZ will allow wider conversion of the renminbi.

It will allow convertibility of the renminbi on the capital account for the first time, under the pre-condition that risk can be controlled. The Chinese draft plan will also have the market set interest rates at the FTZ.