"Nobody helps nobody but himself."
"Sir, you are employing a double negative."
The flow of good commentary on the ECFA agreement between the KMT and the CCP continues unabated. Pick up local business magazines and you can read articles entitled: ECFA: elixir of life or poisonous brew? and similar. Today the Taipei Times offered an excellent piece by the pro-Taiwan Taiwan Think Tank's Chien Yao-tang that highlighted both the propaganda drive and the eventual negative effects. First he points out that the two generation gap in wafer fabrication technology that President Ma has proposed to protect Taiwan's tech is actually an illusion:
The only restriction the Ma administration placed on this opening up of Taiwan’s electronics sector was that the production technology for wafer fabs in China lags two generations behind Taiwan’s. While it may sound like this seeks to minimize the loss of Taiwan’s cutting-edge technology to China, it is in fact a sure way to hand over technological know-how to China.Needless to say, the DPP program was to protect this industry and curtail its ability to move to China. Ma's program is to hand it over to the Chinese. Oh, and the elimination of tariffs that the Ma Administration has claimed Taiwan will need to keep its markets in China in the face of the free trade agreements? What's the actual tariff on Taiwan's exports to China, according to Chien?
In addition, there is a two-generation gap between Taiwan’s United Microelectronics Corp (UMC) and China’s Hejian Technology, which UMC wishes to acquire.
If this happens and Hejian increases its production technology to the same level as UMC’s, does that mean UMC will have to pull out of Hejian? Of course it won’t. So in reality, the two-generation gap in technology is just to dupe the public.
The average rate is 0.58 percent.ECFA's benefits are an illusion. Luo Chih-cheng of the pro-Taiwan Taiwan Brain Trust observed in another Taipei Times piece that some Taiwanese firms in China don't want ECFA but are either directly pressured, or not saying anything for fear of retaliation by Beijing or the KMT. The Ministry of Economic Affairs (MOEA) said that additional industries will be hit by Chinese goods, raising the number to 17 from the 12 originally predicted.
The five additional sectors are: traditional Chinese herbal medicine, agricultural pesticides, environmental medicines, veterinarian medicines, and wood and bamboo products.The government has also put restrictions on Taiwanese banking investments in China....
The original 12 sectors are garments, underwear, sweaters, swimwear, towels, bedding, socks, footwear, suitcases, home appliances, stoneware and ceramics.
From the Taiwanese side, to ease concerns that the Taiwanese banking sector may use local deposits to fund its loan businesses in China, the commission’s new regulations stipulate that half of the loans to be granted by the banks’ to-be-established outlets in China will have to come from Chinese depositors. The commission has also placed a cap on each Taiwanese bank’s China-bound investment at less than 15 percent of a bank’s net worth or 10 percent of a financial service provider’s net worth.What's Mega Financial Holding Co? Well despite the name, it is not something out of The Jetsons or Destroyer Duck. Hold that thought....
All of this means that the capital outflow of 14 Taiwanese banks to China will be capped at NT$25 billion (US$785 million), while that of 13 financial service providers will not exceed NT$50 billion.
To a certain degree, both rules aim to put a brake on the acceleration of China-bound capital flight within the banking sector, which was previously barred from branching into China.
This contrasts with earlier estimates by China Development Industrial Bank president Simon Dzeng (曾垂紀), at the time executive vice president at Mega Financial Holding Co, that once the government gave the green light, most domestic banks would move into the Chinese market “within three months,” resulting in a fund outflow of as much as NT$300 billion.
Sorting out the links between the US financial industry, China, and Taiwan is going to be a full time job and I sure am glad I won't have to be doing it. But just a taste: prior to the 2008 election the global finance world was backing Ma, and is now getting its support returned in the ECFA agreement. A friend flipped me the Taipei Times editorial I linked to above, and this seemingly unrelated piece in the China Post, with Ma congratulating Park Strategies on opening its office in Taipei:
President Ma Ying-jeou described a U.S. strategic consulting firm's decision to set up its Asia operations center in Taipei as "wise" during a meeting with former U.S. Senator Al D'Amato, founder and managing director of the company, at the Presidential Office Thursday.The VP of Park Strategies is Sean King, and some of his articles are listed here. King, a big fan of President Ma, is a former Senator D'Amato staffer, D'Amato himself having a long and very positive interest in The Beautiful Island. Recall that a financial industry official told me shortly before the election that the financial industry had been lining up players in anticipation of a Ma victory for two years. ECFA is not just about selling out Taiwan to China....or rather, not everything sold will be sovereignty. But it is who is doing the buying and selling that is interesting.
D'Amato said Park Strategies chose Taiwan as the location for its operations center in light of the vast business opportunities expected to be created with the warming relations between Taiwan and China and a proposed economic cooperation framework agreement likely to be signed between the two sides.
Past and present commingle: when the KMT came over in 1949 the bond holdings of Chinese, Taiwanese, and Japanese (Jan 2010 lawsuit in US on the issue) were converted into assets of the Bank of China, which is now a unit of Mega Holdings, and which is named in passing a lawsuit against the KMT to recover the monies. An article on the lawsuit notes:
The bonds have exotic names like Imperial Chinese Government Hukuang Railways Gold Loan, French Boxer Indemnity and 1913 Reorganization Gold Loan and they are all in default.What's Mega Financial Holdings? This little blurb on Grand Cathay notes:
Holders of Chinese bonds issued from 1895-1942 which are all in default since 1949 are taking on the former masters of Nationalist China – the Kuomintang. The bondholder plaintiffs which include two American bond holding corporations and the Taiwan Civil Rights Litigation Organization are suing the Kuomintang’s business management committee for an accounting and redemption of 120,000 separate bonds some over 110 years old and backed by gold.
The name of the case filed in the United States District Court for the Northern District of California is Taiwan Civil Rights Litigation Organization et al v. Kuomintang Business Management Committee – Case No. C10-362JL.
Unlike most other Taiwanese securities firms, which are owned and operated by family groups, Grand Cathay is owned by a group of institutional investors. The largest shareholder of Grand Cathay is an investment arm of the KMT (Kuomintang), controlling 25% of the firm. Although the KMT is no longer the ruling party, it is not expected that its status as the largest shareholder of Grand Cathay will change over the near term.That investment arm of the KMT? Oh yeah -- Mega Holdings.
Recall that the Financial Supervisory Commission has said that the current restrictions on Taiwanese bank investment in the PRC will be relaxed over time.
Yes, and a big beneficiary will be big institutional investors...like Mega Holdings, the investment arm of the KMT.
Manus Manum Lavat.
More Daily Links
- In pro-KMT UDN poll, Ma's approval ratings are dismal, DPP's Su slaughters Ma in hypothetical 2012 election, and DPP Chair Tsai is neck and neck, in both cases a third failing to register an opinion.
- DPP's Tsai to run for Chairman of the DPP again. Very good news indeed!
- With China aiming 3/4s of its military exercises at Taiwan, KMT legislators call for confidence building measures. Sure.
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