TAIPEI (Taiwan News) — Despite the ongoing political turbulence and social unrest in Hong Kong, Taiwan is unlikely to replace the city as a financial hub in the Asia-Pacific region, according to the country's financial regulator chief, who cited the language barrier, legal system, taxes, currency exchange system, and regulators' attitude towards risk.
Financial Supervisory Commission (FSC) Chairman Wellington Koo (顧立雄) said at an insurance networking event on Thursday (Dec. 5) that Taiwan is unlikely to replace Hong Kong as a regional financial hub for five reasons.
Koo also said that to improve the competitiveness of Taiwan's capital market, the government is set to give a green light to 16 financial products and services by the end of the year, deregulating the country's offshore banking units (OBUs) to encourage overseas Taiwanese businesses to keep their money in Taiwan for different types of transactions and investments.
The first reason Taiwan's chances of replacing Hong Kong as a financial hub are dim is the difference in legal systems, Koo said. Whereas Taiwan's continental system requires a written collection of the laws to follow, Hong Kong's common law system only specifies offenses in approved writs, giving financial service providers more room and flexibility to innovate and operate their businesses in any way not explicitly forbidden.
Secondly, the majority of people in Hong Kong read and speak English, observed Koo, while in Taiwan that is not the case. The language barrier in private and public services would be an inconvenience for international companies if they brought their regional headquarters to Taiwan.
Thirdly, Hong Kong's low-tax environment provides a greater incentive for businesses than does Taiwan's, as does its exchange currency system. Meanwhile, the island country adopts a managed float regime with a small daily fluctuation band, making the New Taiwan dollar less attractive to foreign investors, said the chairman.
Last but not least, Taiwan's financial regulator takes a more cautious approach than its Hong Kong counterpart to opening its market to complex, high-risk products in the name of protecting investors.