(AFP) – Jun 24, 2008

TAIPEI (AFP) — Taiwan plans to lift a ban on Chinese banks investing in their counterparts on the island as cross strait ties improve, a financial regulator said on Tuesday.

However, the Financial Supervisory Commission said it is considering a cap on Chinese banks' ownership in Taiwanese banks if the ban is removed.

"With tensions across the Taiwan Strait reduced, the relaxation is expected to increase and enhance economic exchanges between Taiwan and China," commission vice chairwoman Susan Chang said.

"The move is also part of Taiwan's efforts in financial liberalisation," she said but added that the commission has not yet set a timetable for the relaxation.

The plans come as relations across the strait thaw following the election of Ma Ying-jeou of the China-friendly Kuomintang earlier this year.

In an initial phase, Chang said the investment cap may be fixed at 20 percent but any details still need to be mapped out.

"The investment restrictions can ensure Taiwan's side will keep control on bank management," Chang said.

The commission also aims to allow local brokerages to invest in their counterparts on the mainland through offshore subsidiaries. The relaxations are pending approval from Taipei's Executive Yuan, or cabinet.

The commission already gave the go-ahead in April for Fubon Financial Holding Co to sink 34 million US dollars into Xiamen City Commercial Bank, the first time a local bank has been allowed to invest in the mainland.

Fubon's money will give it a 20 percent stake in the Xiamen bank through its Hong Kong subsidiary. The investment proposal is under review by Chinese financial authorities.

The approval for the Fubon investment came less than two weeks after Ma won the presidential polls in a landslide. He succeeded independence-leaning President Chen Shui-bian in May.

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