Taiwan, China sign pact on financial firm exchange

TAIPEI, Taiwan - Taiwan said it signed a long-anticipated memorandum of understanding with China on Monday allowing banks, securities and insurance firms to conduct business in each other's territory for the first time.

The agreement came seven months after the two sides signed a deal on the exchange of financial operations during their regular high-level negotiations on economic ties.

Taiwan's Financial Supervisory Commission said it signed the documents Monday with related Chinese agencies overseeing banks, and securities and insurance businesses.

Under the MOU, the supervisory agencies of China and Taiwan can dispatch officials to audit and oversee operations of financial institutions on the other side's territory, according to a Financial Supervisory Commission statement.

The deal will take effect in two months. Taiwan and China have also agreed to exchange financial data needed for the approval of acquisitions, mergers and other acts, it said.

Taiwanese officials have said terms of the pact are subject to further negotiation when the two sides meet to discuss a wide-ranging free trade agreement. No date is set but Taiwan says it hopes the trade deal can be signed by next spring.

China sets strict terms on foreign financial institutions, and a Taiwanese bank would have to wait at least three years before being allowed to take deposits and extend loans in the Chinese yuan.

Taiwan wants China to remove the restrictions and give the island preferential treatment under the new trade agreement.

The deal demonstrated a growing pragmatism by the rivals that have sought rapprochement since China-friendly Taiwanese President Ma Ying-jeou took office 17 months ago.

Ma has proposed to cement closer economic ties by putting aside disputes over the self-ruled island's political status. The two sides split amid civil war in 1949, but China still claims the island as part of its own territory.

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