Tuesday, August 20, 2013

Taiwan and China take yet another step towards economic integration

A short snippet taken from April's edition of Monocle magazine.

"China and Taiwan might be diplomatic adversaries but their economies have never been more tightly intertwined.  Businesses and investors on both sides of the strait can now exchange Chinese renminbi and Taiwanese dollars without having to convert to US dollars first. It's part of a gradual warming of economic ties with China that Taiwan's president, Ma Ying-jeou, has pursued since taking office in 2008.  Taipei's hope is that it will become a regional financial centre; the more likely scenario is that Taiwan adds to renminbi trading, raising the Chinese currency's profile overseas (emph. added), says Frances Cheung, senior markets analyst at Credit Agricole CIB in Hong Kong."

Unfortunately, Mr. Cheung is probably right with his analysis.  Until Taiwan makes the difficult decision to deregulate its banking and energy sectors, moves such as the one described above will simply enhance the international perception that  Taiwan is moving ever closer towards near-total  economic dependency on China.  

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