The southeastern Chinese city of Xiamen’s first financial exchange is tipped to start trading by the end of the year after receiving Beijing’s backing in what is a key pilot project for China-Taiwan integration.
The bourse, which will start with registered capital of Rmb50 million ($7.9 million), is touted as a first step towards developing a two-way financial services industry in China’s economic zone of coastal cities west of the Taiwan Strait.
As the zone’s anointed hub, Xiamen is striving to instigate financial products and services including securities issuance, registration, transaction and settlement.
Its Cross-Straits Financial Assets Exchange will be a transaction platform for performing and non-performing bank assets, commercial paper, non-listed equity shares in enterprises, credit assets and trust products.
Xiamen aims to open the scheme up to financial institutions from Taiwan and facilitate cross-strait currency exchange. Presently, the only exchange in the city is Xiamen Asset Exchange, where domestic companies can trade unlisted equity shares.
The new bourse is seeking both to upgrade the service quality that Xiamen provides to Taiwanese financial institutions and provide them with a platform for their Taiwan dollar-denominated assets. It is also seeking to attract foreign financial institutions to participate. Initially the exchange is targeting trading volumes of around Rmb150 billion a year.
“We are also trying to introduce Taiwan’s OTC market to Xiamen to serve as a corporate financing platform for Taiwanese companies with operations in China and Chinese companies which want to expand to the Taiwan market,” explains Jeoven Wong, chairman of the Federation of Returned Overseas Chinese.
However, these proposed initiatives can only be realised once concrete guidelines have been issued by the governments and regulators in both China and Taiwan.
Wong says Xiamen’s local business community is lobbying for regulatory support to pave the way for further cross-strait financial cooperation. “The private sector is enthusiastic," he adds. "We are looking forward to a deregulation initiative to realise [integration] through more frequent dialogue between regulators from both sides.”
The Xiamen exchange is a joint initiative of local government officials and the Beijing Financial Assets Exchange, which was established last May as a first of its kind in the country and which takes a controlling 60% stake in the venture. The other shareholders are Xiamen Asset Exchange, Xiamen Jinyuan Group and Grace Holdings.
The new bourse has had its name approved by China’s State Administration for Industry and Commerce and aims to complete the process of business registration by the end of this year.
Xiamen has been chosen as the financial centre for the economic zone west of Taiwan, which integrates the delta regions of the Pear and Yangtze rivers incorporating Fujian province, south Zhejiang, north Guangdong and part of Jiangxi.