Cross-Strait Relations in Financial Services the Hong Kong Case in Perspective

Bilateral financial linkages between Taiwan and mainland China are developing at a retarded pace. Relative to robust flows in the physical sphere, namely, trade and (unilateral) investment-parallel move in the sphere of circulation lag substantially behind. On the surface, this is due to the onerous lack of any official framework accord which may legitimize and facilitate banking and financial activities both ways. But the real cause is structurally more deep-seated and it defies reasoning from purely economic perspectives. It is understandable, therefore, that activities that are free from, or less intervened by, the visible hand - the public authority - or any convention requiring mutual consent would perform better. The case is totally different for Hong Kong, for with the latter there is no “split” or “conflict” of goals between the goveming body and the govemed. In more detail, this short note intends to characterise the current cross- Strait financial linkages by drawing reference from the rapidly-integrating PRC-Hong Kong counterpart. It is argued that to avoid further losses arising from superinefficiency in the businesses there is an urgent need to bridge the fault lines.