Yesterday I watched a TV talk show with the main topic of that the most profitable bank in Taiwan of 2013 had been Bank of China from Mainland.  The bank hired only 50 employees in its Taipei branch, but created a profit of 40 billion NT, greater than any local big names which usually hired thousands of employees.

The anchorman and the TV pundits accused the bank of lending RMBs to its local counterparts as the tool of deposit with higher interest rate for attracting NT from the islanders.  Because Taiwans local banks are yet to be allowed doing  business in Mainland, so they have to the lend money back to Bank of China, Taipei branch for a higher rate than the one they give to their custmers in Taiwan.  However, Bank of China head quarter can in turn lend the money to their stringent customers of Mainland who are badly in need of the loan at even higher rate.  That is why the branch of Bank of China in Taipei could earn such a remarkable profit out of huge spread, effortlessly.  In so doing, the NT dollars drained from our pockets and flowed to RMB have accumulated up to 1 trillion since the government gave permission to local banks for opening RMB accounts to the public.  Then those "pundits" asserted that Mainland had used Taiwans money gratis to quench her financial thirst to attest the greed of China and the stupidity of Taiwan.  Huge money for Mainland?  Big deal. 

The fact has been like this.  People in Taiwan are pursuing RMB because it can offer higher interest rate than that of NT.  But why cant NT offer the same rate as RMB does?  Because the banks of Taiwan dont need so much money, for there are no adequate investment channels for those money to go.  Therefore, the ultimate reason lies in the doldrums of current Taiwans economy.  You may ask why doesnt Mainland allow Taiwans bank to use the RMBs on hand to serve their customers operating in Mainland?  Okay, then sign the trade-service-pact first, will you?