ROC Taiwan 2002

ROC Yearbook 2002

Finance and Banking
As a member of the WTO, Taiwan will continue liberalization of its financial system.
  1. Public Finance
    1. Government Expenditures
    2. Government Revenues
    3. Debt Obligations
  2. Money and Banking
    1. Money
    2. Financial Institutions
    3. Money Market
    4. Bond Market
    5. Interest Rates
    6. Foreign Exchange Market
    7. Stock Market
  3. Financial Restructuring
Charts, tables, and boxes:

The Republic of China's financial situation in 2000 was not encouraging. The real domestic economy, which had experienced a boom since the Asian financial crisis in 1997, experienced a sharp downturn. Moreover, the financial side of the domestic economy continued to deteriorate as a result of the increasing number of non-performing loans.

In the first quarter, domestic economic growth peaked at 7.94 percent as the global economy strongly expanded. The Taiwan Stock Exchange (TSE) composite index, which took a strong comeback to 8,448 points at the end of 1999, continued to escalate to 10,202 points on February 17, 2000. Meanwhile, the New Taiwan dollar appreciated against the greenback, as the exchange rate rose from US$1:NT$31.395 at the end of 1999 to US$1:NT$30.302 on April 10.

However, the financial situation took a dive in the second half of 2000 despite good performance by the real side of the domestic economy. GDP grew 6.73 percent, and exports and imports jumped 29.9 percent and 34.5 percent respectively in the third quarter. But bearish sentiments in global stock markets began to affect domestic stock markets.

The situation became even worse when Premier Tang Fei resigned in October 2000 because of turmoil caused by the problem of the Fourth Nuclear Power Plant. In addition, weak global demand for IT products wreaked havoc on the domestic economy and the GDP growth declined sharply to 3.82 percent.

The TSE index slid to the bottom at the end of 2000 and closed at 4,739 points. The New Taiwan (NT) dollar also had a large depreciation against the US dollar. All of these developments indicated that both the real side and financial side of the domestic economy was losing ground even though annual GDP growth for 2000 reached 5.86 percent.

The government continued to relax regulations on capital markets and reform financial institutions. For instance, a second board market, Taiwan Innovative Growing Entrepreneurs (TIGER), was created in April 2000 for over-the-counter (OTC) trading. On October 13, 2000, the Legislative Yuan passed the revised Banking Law 銀行法部分條文修正案, increasing the limit of individual shareholding in the same bank to 25 percent. The Legislative Yuan also passed the Financial Institutions Merger Law 金融機構合併k on November 24, 2000, serving as the enabling law for establishing asset management corporations (AMCs) to accelerate the disposition of non-performing loans.

Despite the worsening economic situation in the first half of 2001, deregulation and reform in the financial sector continued. The Financial Holding Company Act 金融控股公司法 and other related laws were passed during an extended session of the Legislative Yuan. All these developments indicated that the government was determined to solve the non-performing loan problems and adapt the financial sector to world standards.

In this chapter, we use an average exchange rate of US$1:NT$32.27 for the year 1999 and US$1:NT$31.23 for 2000. As for fiscal year 1999 (from July 1, 1998 to June 30, 1999), an average rate of US$1:NT$33.12 is used. And for fiscal year 2000 (from July 1, 1999 to June 30, 2000), an average rate of US$1:NT$31.44 is used. To avoid confusions resulting from currency fluctuations, this chapter will use the NT dollar as the unit of calculation where appropriate, unless otherwise noted.


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