In the past two to three decades, no matter which political party was in power, the government would launch financial development programs with policy goals such as making the country an “Asia-Pacific financial center,” an “Asia-Pacific fundraising and asset management center” or a “yuan-related wealth management center.” However, those grandiose plans always ended in vain, and Taiwan still lags far behind major economies in the region in terms of diversity and openness in the financial market.
Taipei ranked 73rd among 121 cities globally in terms of competitiveness as a financial center, the Global Financial Centres Index (GFCI) showed. That is a drop of six places from the survey published in September last year.
New York and London remained the world’s top two financial centers, followed by Singapore, Hong Kong and San Francisco. Shanghai overtook Los Angeles in sixth place, with the latter dropping to eighth, while Geneva climbed to seventh, Chicago stayed in ninth and Seoul advanced to 10th.
Taipei’s GFCI ranking has dropped continuously in the past few years after placing 19th in 2010. Regionally, Taipei ranked second-to-last among 20 cities in the latest poll, lagging behind major Chinese cities like Shanghai, Shenzhen and Beijing, as well as Guangzhou, Chengdu, and even Hangzhou and Dalian, the survey showed.
The survey results suggest Taiwan’s role as a financial center is seemingly diminishing every year. Even so, growing the domestic financial sector and turning Taiwan into an asset management center has again become a hot topic after new Financial Supervisory Commission (FSC) Chairman Peng Jin-lung (彭金隆) took office on May 20, seeking to fulfill a major policy proposal made by President William Lai (賴清德) during his election campaign last year.
At a news conference to mark his first month in office on Friday, Peng listed the components that help form an asset management center or a financial center, including a sufficient professional workforce, fewer regulations on foreign currency exchange, an attractive taxation system and an environment with English proficiency. The area must also have a more flexible trust system and diversified fund designs, and even fewer geopolitical risks, he said.
Although compared with its neighboring peers, Taiwan poses higher geopolitical risks, it can still develop into an asset management center with its unique characteristics, such as the nation’s strong semiconductor and manufacturing industries and ample household financial assets, Peng said.
Peng said he is inclined to take a more realistic approach toward achieving that goal by encouraging the financial industry and domestic investors not to move funds into foreign markets, but to invest in Taiwan. The nation’s financial account registered net outflows for 55 consecutive quarters as of the end of first quarter of this year.
Peng’s confidence is partly based on a wealth report released by the Allianz Group in September last year, which ranked Taiwanese households as the second-richest in Asia and No. 5 in the world in terms of net financial assets per capita. Meanwhile, Taiwan was the 14th-richest country among 193 economies in the world last year, ahead of South Korea at 30th, Japan at 38th and China at 77th, an analysis by Global Finance magazine showed.
Even though Peng did not reveal any concrete measures, the plan to speed up regulatory reviews on structured notes, ease collateral rules for investors and facilitate insurance premium financing is a good start, while differentiating Taiwan from its regional peers in terms of its market and service offerings is a must. After all, Taiwan needs to take an honest look at the nation’s strengths, such as abundant net financial assets and robust foreign trade growth, and then leverage its advantages to create a friendly environment for the financial community.
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