Economic Cooperation Framework Agreement - Background

Background

Further information: Economy of the People's Republic of China, Economy of Taiwan, and Three Links

The government of the People's Republic of China uses its influence on neighboring economic powers to prevent them from signing free-trade agreements (FTAs) with Taiwan. Instead, under the leadership of the Kuomintang, Taipei was motivated to sign the ECFA with mainland China partly in hope that once it has this agreement the PRC will stop pressuring other countries to avoid such agreements with Taiwan. The ECFA has been compared with the Closer Economic Partnership Arrangements mainland China signed with the Special Administrative Regions: Hong Kong and Macau.

The deal is thought to be structured to benefit Taiwan far more than mainland China. The "early harvest" list of tariff concessions covers 539 Taiwanese products and 267 mainland Chinese goods. The advantage to Taiwan would amount to US$13.8 billion, while mainland China would receive benefits estimated at US$2.86 billion. Mainland China will also open markets in 11 service sectors such as banking, securities, insurance, hospitals and accounting, while Taiwan agreed to offer wider access in seven areas, including banking and movies.

Financial reforms were kicked off on January 16, 2010 with the signing of three Memoranda of Understanding between Taiwan's Financial Supervisory Commission Chairman Sean Chen and three counterpart agencies in Beijing for Banking, Insurance and Securities. The FSC is hoping that Taiwan will get more leniency in the hurdles set by the Chinese government for foreign players. These hurdles have limited the growth of these foreign players relative to their local peers.