Financial authorities on both sides of the Taiwan Straits have given permission to banks to open direct remittance links, a move analysts hailed as conducive to cross-Straits economic exchanges even though the move is belated.

The policy loosening, which Taiwanese banks and their corporate clients with investments on the mainland started to lobby early last decade, is being celebrated by investors and banks now that lower operational costs and fresh business opportunities will be more widely available.

"It's a welcome move as the cross-Straits flow of funds has been frequent," said Qin Chijiang, deputy secretary-general of the China Society of Finance. "Investors from Taiwan are the biggest beneficiaries."

Taiwanese investors had poured US$60 billion of investment in more than 40,000 businesses on the mainland, but had to make remittances and account settlements through third parties, mostly banks in Hong Kong or the United States, due to political barriers.

Although the central bank, the People's Bank of China (PBOC), has not officially announced the decision, mainland banks have already been racing to build on their lists of partners on the island.

"It has been approved," said a PBOC spokesman Thursday. Declining to give details, he said an announcement will take place next week. Media reports earlier this week quoted PBOC Governor Dai Xianglong as saying the decision had been made.

Among the earliest to respond, the Industrial and Commercial Bank of China (ICBC), the mainland's biggest commercial bank, announced yesterday the start to its remittance and settlement services with Taiwan.

The bank said it had signed up 22 banks of Taiwan and 12 foreign banks operating on the island as its correspondent banks, enabling it to handle remittances, letters of credit and settlements across the Straits. "And the numbers are growing rapidly," said Gao Ming, a senior international operations manager with the ICBC.

"Now the route for business exchanges has been straightened," she said, "and we are now able to provide better services to our clients." The shortened routes will save bank clients an average of US$15-25 per remittance, which they had to pay before, and the duration will be almost halved to within one day.

But analysts were not satisfied with the pace of progress. "It was not at all a surprise to me," Qin said. "There were no technical difficulties, nor was it economically controversial. If the Taiwan authorities had the correct attitude towards the direct links, it could have been fairly easy."

Qin also expressed concerns over a lack of uniform arrangements governing all banks, calling the current approach, where individual banks seem to be working on their own, as unstable and vulnerable to political uncertainties.

He said there needs to be procedural rules for the new operation and agreements on settlements of possible disputes and mistakes, which may cause trouble without the legal guidance previously available through the third party.

Instead, Qin said an overall agreement should be worked out by leading banking associations on both sides.

(China Daily July 12, 2002)