Listen for the Giant Sucking Sound: Financial MOU inked

Lots of news and commentary on Taiwan-China relations in the wake of the MOU negotiations. We'll start with the eTaiwan News editorial:

In an address at a seminar on "60 Years Across the Taiwan Strait" held in Taipei last week, former CCP Central Party School vice president Zheng Bijian highlighted Beijing's position that there was an "objective need" for a "cross-strait peaceful development framework" to permit "the gradual resolution of the remnant historical issues and the new problems in future cross-strait development."

Zheng grabbed headlines with his declarations that "mainstream public opinion" in Taiwan favors "continuous, peaceful and stable development of cross-strait relations" and is opposed to "Taiwan independence," a cause which the CCP ideologue declared was "doomed to decline and failure."

Other PRC scholar - officials expressed Beijing's intent to set in place a "one China framework" as a precondition of any "peace agreement" and to "legalize the one China principle" in order to "clarify the requirement to oppose Taiwan independence."

As noted by various DPP and pan-green pundits, Zheng's statements reflected at best a "misunderstanding" of the fact that the overwhelming consensus in Taiwan public opinion opposed to cross-strait unification, even if political, economic and social conditions are similar.

Faced with protests from even pro-KMT scholars that the "one China principle" cannot be accepted by Taiwan's people and that the existence of "Republic of China' should be respected, China Academy of Social Sciences Taiwan Research Institute Director Yu Keli stated that the "one China principle" had been jointly formulated by the KMT and CCP to block "Taiwan independence forces in the island" from splitting Taiwan away from China and said "I am a little shocked that now there are still some KMT friends who raise opposing views."

Moreover, the PRC delegation intoned that acceptance of Beijing's "one China principle" was a "precondition" to any "peace agreement," that there could be no possibility of a "legal existence" of the ROC and that only a "Taiwan consciousness" that did not consider Taiwan to be a distinct state was permissible.

The PRC delegation clearly punctured Ma's quasi-religious faith that the so-called "Consensus of 1992" meant "one China with separate expressions" and would offer sufficient flexibility to tolerate the KMT's retention of the fig leaf for its "legal tradition," namely that "one China" meant "the Republic of China."

This state of affairs should not have come as a surprise given innumerable affirmations by PRC leaders, including by Hu himself in his six-point statement on Dec. 31, 2008, that all cross-strait consultations and agreements, including economic, are predicated on Beijing's "one China principle."

Taiwan News' argument is that the PRC isn't going to tolerate any of the fig-leaves that Ma has attempted to spread over the PRC's One China principle: it is going to insist on a One China policy that leaves room neither for a Republic of Formosa nor for a Republic of China. The KMT heavyweights currently shuttling back and forth between the two parties probably won't don sackcloth and ashes for the ROC, especially since handing over The Beautiful Isle will guarantee their family's places in the new order, but Ma has increasingly struck me as a True Believer in the ROC.

Of course, opposition voices weren't invited to the forum ...

“[Chinese President] Hu Jintao’s [胡錦濤] confidant Zheng Bijian [鄭必堅] can come to Taipei and claim that the Taiwanese independence movement is doomed and some retired People’s Liberation Army general can threaten us the next day, but academics from the opposition are not invited,” Wu said.

This PRC's heavy-handedness and inflexibility may yet disrupt the smooth flow of capitulation. I'm curious to see what happens when the PRC starts complaining about the pace of the sell out. It is not difficult to get on BBS all over China and see nationalist hotheads calling for an invasion since Ma Ying-jeou is just as big a disappointment as Chen Shui-bian. Ma's election increases tensions? Say it ain't so! It will also be interesting to see whether the US will turn on Ma the way it turned on Chen Shui-bian when the KMT government starts hemming and hawing over the damage that ECFA and the MOU will do to the Taiwan economy and thus, to its electoral chances.

The Taipei Times noted that the legislature was unhappy with the "surprise" signing of the MOU (which is non-binding).....

The DPP criticized the government for compromising the nation’s sovereignty as the MOU was signed under Beijing’s “one China” framework, adding that it held the legislature in contempt for keeping the contents of the MOU secret.

It said the MOU would harm the local finance sector and that only Chinese lenders would benefit from the deal.

“How the signing of the MOU was handled proves that Premier Wu Den-yih (吳敦義) lied when he said last week that he would show respect for the legislature,” DPP Policy Division Deputy ­Executive-Secretary Liu Chien-hsin (劉建忻) said.

Financial Supervisory Commission (FSC) Chairman Sean Chen (陳冲) announced unexpectedly at 6:15pm on Monday that the commission had completed the signing of the MOU with its Chinese counterpart at 6pm via a document exchange.

It happened just a few hours after officials discussed the issue with lawmakers at the legislature’s Finance and Economics committees.

The agreement was signed in the name of financial supervision representatives on the Taiwanese and Chinese side to avoid the official title of the two regulators, which carries the phrases “Executive Yuan” and “China” respectively.

My favorite line in there? "Chinese Nationalist Party (KMT) Legislator Lee Ching-hua (李慶華) said the commission had failed to fully respect the legislature." Who is Lee Ching-hua? He's the brother of Diane Lee, who failed to report her US citizenship to the legislature and may be facing corruption charges. However, she didn't beat Lien Chan twice in a Presidential election so I expect she'll be ok....

eTaiwan News, as usual, had a clear explanation of why the MOU was so problematic:

Even though such MOU's are not legally binding documents, it is notable that the accounts of the content of the MOU by both Taiwan's FSC and the PRC's CBRC fail to make any mention of "official" or government authorized and legally accountable supervision or the establishment of an "official" cooperative mechanism for cross-border financial supervision based on the Basel principles.

Hence, the questions of whether the FSC will be able to directly send legally empowered staff to carry out financial inspection of Taiwan bank branches operating in the PRC or whether cross-border financial interactions, which is particularly sensitive given the PRC's political ambitions with relation to Taiwan, will be subject to "effective supervision" lack a definitive answer.

Moreover, the "surprise" decision to sign the MOU after a day of legislative questioning by lawmakers indicates that the KMT government aims to avoid substantive legislative review of the MOU and allow it to automatically take effect 60 days after signing on January 16 based on Article 25 of the statute governing cross-strait relations, backed by the KMT's overwhelming majority

I have also heard that Taiwan banks in China will be forbidden under the MOU to take deposits in RMB, meaning that they will have to bring in capital from Taiwan, and convert it to RMB in China -- meaning that the MOU will result in capital being sucked out of Taiwan. Informed sources tell me that it seems likely that the current law, which prohibits Chinese financial firms from setting up shop in Taiwan, will be revised within 60 days to permit them to establish banking outlets here (WTO mandates equal treatment, unless an exclusion is declared -- the KMT Administration does not appear likely to do that).

Let us also not forget that China's banking industry is basically state-owned and run. Remember how China apparently used the flow of tourists to punish Taiwan for political action? Now imagine what its banks might be capable of....WSJ is already reporting that one of China's Big Four banks, the basically state-owned China Construction Bank (formerly People's Construction Bank) has already expressed interest in entering Taiwan...

This is not "free trade." This is trade that is managed, and at present, managed to keep it out of public scrutiny here in Taiwan, and apparently, in favor of China.
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Daily Links

• Silicon Sweatshops -- great piece by Jonathan Adams on workers in the hi-tech industry here.
• What's Up Taiwan #41 out
• New Zealand grants Taiwan visa-free entry.
• America's good cooperation partner poisons the US. Again.
• RTI on John Huntsman, US Ambassador to China
• Lost in hu-ha over MOU, Taipei announces it will admit Chinese students.

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