Bankers Association Chairman Lee Chi-chu "Hong Chun-pei Culture and Education Foundation" public-interest lecture

(Taiwan Business News) On April 13, the Hong Chun-pei Culture and Education Foundation and Taiwan Business News invited Dr. Lee Sorry, I can't respond to this question.

Dr. Lee Chi-chu, Chairperson of the National Federation of Bankers' Associations of the Republic of China (Taiwan, China), began by discussing Taiwan's financial environment and related economy. She said that Taiwan's economic growth has slowed in recent years and exports have been insufficient, largely due to its originally poor constitution or structure. First, export products are concentrated, with more than 50% concentrated in electronics, plastics, chemicals, optics and other industries, and more than 50% of enterprises adopt the "Taiwan takes orders, China exports" model, with a high proportion of intermediate goods, making them highly vulnerable to economic cycles. For example, the European debt problem caused the European and American laptop market to decline, and Taiwan's component export market naturally suffered as well. At present, with the mainland economy taking off, many mid- and upstream products can also be produced domestically. Facing China's price-cutting competition, Taiwan naturally has few competitive advantages under these conditions.

In addition, most Taiwanese businesses are in OEM industries with low added value and low gross margins, causing Taiwanese businesses to seek low labor costs in the mainland or Southeast Asia, which brings no substantive benefit to Taiwan in terms of creating jobs. In terms of global economic and trade cooperation, amid the current global economic reshuffle, seeking cooperation and global bilateral and regional agreements has become a trend. Taiwan's markets are not sufficiently diversified, and its efficiency in participating in multilateral economic negotiations is too slow (different from South Korea's national conditions). China, Japan and South Korea are all negotiating FTAs. Taiwan's excessive slowness may face a crisis of marginalization. Its earlier failure to join ASEAN's RCEP has left Taiwan in a disadvantaged predicament. The trade in services issue, signing FTAs, and joining the TPP may be the time for the people to make a choice.

Public lecture by Dr. Lee Chi-chu, Chairperson of the National Federation of Bankers' Associations: Cross-strait financial opening, Taiwan has advantages

In recent years, cross-strait physical economic and trade exchanges have become increasingly close, and related financial services need to be matched in place with each other in order to achieve synergy. In 2009, the third Chiang-Chen Talks signed the Cross-Strait Financial Cooperation Agreement, laying the foundation for cross-strait financial cooperation. In November of that year, the Financial Supervisory Commission signed the cross-strait financial MOU, opening mutual establishment of branches and equity investment, and establishing the basis for the two sides to subsequently build a financial supervision platform and negotiate market access issues. In 2010, the two sides signed the Economic Cooperation Framework Agreement (ECFA), under which Taiwan's financial services industry secured 10 preferential measures, opening two-way cross-strait financial exchanges. The three subsequent rounds of the Banking Supervision Cooperation Meetings and the first Securities and Futures Supervision Cooperation Meeting laid the foundation for the opening commitments regarding financial services in this Cross-Strait Agreement on Trade in Services, further pushing cross-strait financial cooperation into an institutionalized stage of development. On June 21, 2013, the two sides signed the "Cross-Strait Agreement on Trade in Services," in which, in the financial services sector, the mainland made 1, 6 and 8 opening commitments to our side in insurance, banking, and securities and futures respectively, while our side made 9 opening commitments to the mainland. The cross-strait financial industries complement each other's advantages and cooperate together, providing more niches for our industry players and the general public.

Dr. Lee Chi-chu, Chairperson of the National Federation of Bankers' Associations, who comes from an academic background, made contact with the mainland financial industry very early. Since the first "Cross-Strait Financial Academic Seminar" was held in 1994, nearly twenty years have passed, and she has often been invited to serve as the opening keynote speaker, so she is highly regarded in mainland industry, government and academic circles. Lee Chi-chu said, "For sensitive issues, it depends on how you discuss them. As long as you are professional enough, both sides have sincerity for cooperation, and you raise your vision and perspective to look at things, many things become negotiable." The situations across the strait are different. Because Taiwan started late in the mainland market, and the two sides' WTO commitments differ. For example, we allow foreign capital to directly set up branches or subsidiaries without needing to set up representative offices, and they can immediately conduct Taiwan dollar business; but the mainland requires foreign capital to first have a representative office for two years, and only after a branch has operated for three years can it conduct RMB business. In addition, the market size, institution size, and equity structure of the cross-strait financial industries differ, so if we directly follow WTO rules, our industry players will have a very hard time developing in the mainland.

At present, the mainland is undergoing financial reform. Lee Chi-chu believes that Taiwan's financial services have their advantages, and that Taiwan is still more advanced than the mainland in many aspects, such as credit cards, wealth management, and fund management. China Merchants Bank is one example. It grew from a bank that was originally not large into the bank with the largest credit card issuance volume in the mainland, and also the most profitable. Although its scale is far smaller than the mainland's four major banks (Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, and Bank of China), it can rank first in credit cards. The head of their credit card department is Taiwanese, and the credit card information system and marketing strategy were all planned and built with the help of Taiwanese people, clearly showing that Taiwan's financial institutions still have niches in many fields.

The two sides should enlarge the framework, raise their vision, and each bring out their respective advantages to cooperate, with the goal of accelerating the enhancement of both sides' financial industries' international competitiveness. This is the original meaning of cross-strait exchange, rather than looking for the other side's weaknesses and making the other side's development very difficult. Taiwan currently has seven bank representative offices. Upgrading them to branches should not have much impact on the mainland. The mainland can be more generous and share the market with Taiwan. Conversely, where the mainland truly needs Taiwan is in Taiwan's experience and talent.

For example, many things that have happened in the mainland have already happened in Taiwan before, or certain structures are very similar, such as stock market lotteries and retail-investor-dominated stock markets, and investment mentalities are also very similar. This commonality arises from the "cultural similarity" that cultivated these groups of people. The paths that Taiwan has tested, experimented with, and traveled should be precious reference information for the mainland.

Not only past experience can be referenced; in the future, Taiwan will also have experience in developing new financial businesses earlier than the mainland that can be shared. In addition to business, there is also the establishment of financial systems, such as the small and medium enterprise credit guarantee mechanism, or the central deposit insurance system that the mainland is currently planning. Therefore, both sides should look far ahead, enlarge the framework, bring out their respective advantages and cooperate sincerely, and enhance international competitiveness.

Taiwan's financial industry is an important industry for the next wave, but it is a fact that it lacks international competitiveness. It is impossible that encouraging them to go to financial centers such as New York and London will make them stronger. "If the financial industry wants to thrive, it needs market cultivation. And the mainland market provides Taiwan's financial industry with the opportunity to gradually grow." The two sides share the same language and culture, and Taiwan's grasp of social structure is superior to that of other foreign investors, which is very important for the development of the financial services industry.

After all, the mainland's finance started relatively late. Therefore, many of the products the mainland has just opened now are products that Taiwan has developed very maturely, such as credit cards. And for these products that Taiwan has already developed maturely, Taiwanese-funded banks are competitive in the mainland market. Only with competitiveness is there an opportunity to make money, and only then is there the ability to pursue further development.

Afterward, Taiwan's financial industry can, along with the mainland's gradual opening of financial businesses, step by step build up its own competitiveness. Therefore, Lee Chi-chu believes that the mainland is an opportunity for Taiwan's financial industry to have a chance to catch up with advanced European and American countries.

Profile of Dr. Lee Chi-chu, Chairperson of the National Federation of Bankers' Associations

Dr. Lee Chi-chu, Chairperson of the National Federation of Bankers' Associations, has served as a legislator, a professor at a national university for more than ten years, a visiting scholar in the economics departments of Harvard University and Stanford University in the United States, Vice Chairperson of the Financial Supervisory Commission of the Executive Yuan, Chairperson of the Management Committee of the Financial Research and Development Fund, Chairperson of the Insurance Development Foundation, Chairperson of Chunghwa Post Co., Ltd., Minister of the Youth Advisory Committee of the Executive Yuan, a director of Mega Financial Holding, a resident supervisor of Taiwan Cooperative Bank, a director of Chunghwa Telecom, and other positions. She currently serves as Chairperson of Taiwan Financial Holdings and Bank of Taiwan, Chairperson of the National Federation of Bankers' Associations of the Republic of China, a director of the Taiwan Stock Exchange, a director of the Joint Credit Information Center, a member of the Advisory Committee of the National Palace Museum, an advisory committee member of the Taiwan Academy of Banking and Finance, an industrial development advisory committee member of the Ministry of Economic Affairs, and other positions. She has received honors including the Outstanding Research Professor Award from National Chengchi University, the Ten Outstanding Young Persons of the World award presented in Cannes, France, the Eisenhower Award of the United States, the Fulbright Award of the United States, the Ten Outstanding Young Persons of the Republic of China, the First-Class Merit Medal of the Executive Yuan, and being selected as the best finance legislator.

Hong Chun-pei Culture and Education Foundation 103rd Year Public Lecture