The Pacific : FOCUS : Taiwan Aims to Evolve Into Financial Center

Although Taiwan’s stock market tumbled last week following an opposition political party’s call for the island’s independence, the government’s top banking official said in Bangkok that he is confident of Taiwan’s future as a financial center in Asia.

On the economic front, Taiwan has what it takes to become one of Asia’s financial nerve centers, said Samuel Shieh, governor of the Central Bank of China. He was in town to address banking colleagues on the eve of the World Bank-International Monetary Fund annual meetings last week.

But political stability, which Shieh identified during his speech as a second requirement for becoming a financial power, appears more elusive.

After the Democratic Progressive Party, a major political opposition, decided at its Oct. 13 party congress that Taiwan should change its name to the Republic of Taiwan, the Taiwan stock market plummeted about 10% before recovering slightly Friday to close at 4,334 points.

For years, the increasingly vocal political opposition has criticized the one-China policy under which the Beijing and Taipei governments agree that there is just one China and that Taiwan is a province of China. The catch is that both claim to be the ruling government for all of China.

Taiwan’s political opposition, however, rejects rule under either Beijing’s Communist or Taipei’s Nationalist governments, preferring instead to declare independence and establish a new republic.

The opposition’s defiant resolution last week triggered Beijing’s anger, causing China to threaten military action unless the Taipei government can keep the island’s independence movement in check.

In Beijing’s sharpest attack yet against the independence movement, China’s hard-line President Yang Shangkun warned the Nationalists and pro-independence advocates that “those who play with fire will be burned to ashes.”

China’s political gauntlet stunned Taiwan’s financial sector, tossing the market into its biggest downward spiral since last April’s crash.

But even as the market began dropping early last week, Central Bank Governor Shieh remained optimistic about Taiwan’s economic future and the island’s budding role as a financial leader in Asia.

Taiwan, with a gross national product of $161.7 billion in 1990, now has more than 140 trading partners and ranks as the 15th largest trading nation in the world, Shieh told bankers in Bangkok.

Taiwanese officials are also quick to point out that the island has amassed an enviable foreign exchange reserve of $76 billion.

Government statistics show that this year’s exports were at $56.4 billion at the end of September, up 14% from the same period last year. Imports were at $46.8 billion, up 16%.

In fact, Taiwan has done well economically even though in 1980 it was forced to yield its World Bank-IMF seats to Beijing, just as it had ceded its United Nations seat to China in 1971. For the past decade, at international financial gatherings such as the World Bank-IMF annual meetings, Taiwan has been relegated to the status of an outsider.

For example, last week Shieh and a handful of Taiwanese finance and banking executives were in Bangkok not so much to monitor the bank meetings or ask for membership but to network informally with other governments’ central bank officers. In World Bank documents reporting Taiwan’s economic status, the island is referred to as simply Taiwan Province of China.

Not being a bank member means that Taiwan is ineligible for World Bank-IMF loans, but apparently that has not hindered its development.

In addition to carrying on a healthy trade with the United States, Europe and Japan, Taiwan is exploring trade opportunities with Eastern European and Indochinese countries that are moving from planned to market economies.

Taiwan-Vietnam relations especially have improved in recent months. In September, a 22-member Taiwanese economic delegation visited Ho Chi Minh City for trade talks. It was the highest-level official exchange between the countries since the Vietnam War ended in 1975.

Taiwanese entrepreneurs have also been flocking to Vietnam, taking advantage of the window of opportunity the United States left open because of its trade embargo against Vietnam. Japan, not wanting to offend the United States, has shied away from doing business there.

These developments, plus Taiwan’s ambitious six-year economic plan for 1991-1996, should make Taiwan a leading financial center in Asia, government officials said.

Even so, some regional investors have indicated that Taiwan has a ways to go before catching up with Asia’s other financial power centers: Singapore, Hong Kong and Japan. Taipei’s traffic and telecommunications systems, for example, remain handicaps.

The six-year plan would address some of the infrastructure problems. In addition, Shieh said that to encourage international brokerage houses to set up operations in Taipei, the government plans to train a pool of financial specialists, improve telecommunications services, construct a financial tower offering convenient and affordable office space, establish an organized gold market and encourage the free movement of funds, information and people.