Taiwan Abandons QFII System
On October 2, Taiwan's Finance Ministry formally abolished
the QFII (Qualified Foreign Inward Investor) system for
foreign currency remittances into Taiwan. From now on,
inward remittances will only need to be registered so
that the Ministry of Finance is notified of them, unlike
before, when special permission needed to be given for
each transaction. This puts Taiwan on the same footing
as other economies which allow free movement of currencies.
The QFII system was introduced in the late eighties in
Taiwan, when Taiwan's stock market was very hot, and the
US pushed Taiwan to allow US dollars into Taiwan's stock
market. Taiwan introduced the QFII system to act as a
buffer to prevent rapid flows of currency in and out of
the island. Under this body of regulations, investors
needed government approval to remit money into Taiwan
for investment, and needed to state the purpose of the
remittance. If the remittance was approved, investors
needed to keep their money in the stock market for a predetermined
amount of time. Outward remittances also needed to be
individually approved. Understandably, this put a dampener
on investing in Taiwan.
Taiwan's government hopes that the lifting of the body
of regulations will help to stimulate Taiwan's economy.
Taiwan will be having its presidential elections in March
2004.
China has introduced a QFII system this year, which is
largely modeled on Taiwan's system. The purpose in China
was largely the same: to prevent rapid currency inflows
into the country. Many investors expect the Chinese yuan
to rise against the dollar, and this has fueled demand
for the yuan.
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