Geert Bekaert and Campbell R

	Geert Bekaert and Campbell R. Harvey's
	Chronology of Economic, Political and Financial Events in Emerging Markets
	Taiwan
	Major Political and Economic Events
Date
7600	Established open money market with market-determined interest rates.^s
790101	The United States formally recognizes the People's Republic of China and breaks off relations with Taiwan.^a
790201	Effective Rate was placed on a controlled, floating basis with its exchange determined against a "basket" of currencies.
8000	Liberalized CD rates.^s In the Spring, Taiwan was expelled from the IMF and the World Bank.^a
8200	Ministry of Finance began policy of gradual liberalization.^eThe plan has three phases. The first phase will allow indirect investment through trust funds established in the Republic of China. The second phase will allow direct investment by foreign institutions. The third phase will allow free access to foreign capital. ^e
8209	Taipei announced the gradual opening of local stock market to foreign investors via "beneficial certificates" issued by local investment companies. Foreign investors were to be allowed to buy shares in companies in Taiwan.^a
8308	Implementation date of phase one of the liberalization plan. The International Trust Company Limited is established.
8310	The Taiwan Republic of China fund raises $41 million in Europe and Japan for investment in the Taiwan stock market. This fund is made possible by the International Trust Company Limited. ^e
8300	Banking crises (1983-1984): 4 trust companies and 11 cooperatives failed.^a2
8400	Flexible maximum and minimum lending rates introduced.^s
8400	Commercial banks allowed to set prime rate within central-bank administered range. Revoked regulation prohibiting maximum deposit rates from exceeding minimum lending rate.^sOffshore banking operations begin in Taiwan.^a
8507	Failure of credit cooperative Changua Fourth sparked runs on other credit unions in central and southern Taiwan.
8600	Taiwan continued to dismantle its foreign exchange control system. Allowed foreign-invested firms to remit capital gains as well as all of their investment after one year instead of several; reduced tariffs on 1841 items, freed restrictions on transactions in gold; permitted residents to hold or export up to US$5 million in foreign exchange and allowed residents to buy foreign exchange certificates of deposit at minimums of US$10000.^a
860401	Value Added Tax of 5% was instituted (15% for entertainment facilities and 1% for small businesses).^a
8605	Taipei Fund launched on the London Stock Exchange with net asset value of $88 million as of December 1991.^aa
8700	Liberalization of foreign capital account. At mid-1987 the 38-year period of martial law was ended, the ban on strikes was lifted and a constitutional democracy was to be instituted.^s
8707	Practically all foreign exchange controls were lifted. Later in the year, import tariffs on 3500 items were cut. ^a
8801	President Chiang Ching-kuo died, bringing an end to Chiang family rule which lasted four decades. Vice President Lee Tung-hiu was sworn in as his successor, followed by massive public unrest.^a
8800	At mid-year, the Minister of Economy and eight other officials faced impeachment charges over a scandal involving Taiwan's top automobile manufacturer. Liberalizations continued. Foreign stockbrokers could open branches in Taiwan and import tariffs were being reduced.^a
8800	Taiwan lifted a ban on establishment of new banks.^a8
8809	It was announced that the income tax on capital gains would be reimposed at the start of 1989.^a
8800	The introduction of the Insider Trading Laws.^a4
890403	Foreign Exchange Rate liberalization.^s
890720	Complete deregulation of interest rates with advent of a new Banking Law. Relaxed the requirement for entry into the banking system and the establishment of new branches including international offices. Government set to allow foreign investment in the stock market in local companies.^s
8911	Central Bank lifted the US$5 million annual limit for financial institutions making remittances and overseas investments with specified trust funds. Taiwan recognizes the Government on the Mainland and sanctioned indirect investment in China through affiliates or subsidiaries.^a
8900	The first prosecution under the Insider Trading Laws.^a4
9005	President Lee Teng-hui reelected by the national assembly.
9012	Taiwan's securities markets were opened to QFIIs (qualified foreign institutional investors).^a8
9101	IFC Liberalization date.^I
9101	Implementation date of phase two of liberalization plan. Eligible foreign institutional investors may now invest directly in Taiwan securities if they have applied for and received SEC approval as a qualified foreign institutional investor (QFII).^eOutward remittance is not allowed until three months after initial investment. Each foreign institution is limited to holding a maximum of 5% of any listed stock and total foreign holdings in any listed companies may not exceed 10%.^e
9101	Bekaert/Harvey Official Liberalization date. [Final and NBER version].
9101	Kim and Singal Liberalization date.
9112	First ADR announced.^aa
9202	Central bank halts (temporarily) inward remittance of QFII funds.^e
9205	China Steel Corporation plans to place 18 million shares of GDRs worth $400 million marking the first time foreign investors will be allowed to directly purchase equity of a Taiwanese company. Until this time investors were restricted to Euroconvertible bonds and country funds.ⁱ
920529	ADR effective date. (Company=CHINA STEEL CORPORATION - 144A, Exchange=PORTAL)^a11
9206	Asia Cement tapped international market with a $60 million issue.ⁱ
9212	First exchange-traded overseas listing.^a9
9200	Deregulation of the entry of new private commercial banks. Establishment of 16 new banks.^a13
9301	Authorities approve purchase by domestic investors of futures traded on international exchanges as a part of a three stage program to develop domestic futures and options trading facilities.ⁱ
9305	China Hsin raises $72 million through GDR issue on NYSE.ⁱ
9507	New Taiwan Dollar fell 3.5% against the dollar. The government lowered the interbank rate to 4.8%.
9500	Banking crises: failure of credit cooperative Changua Fourthh in late July which sparks runs on other credit unions in central and southern Taiwan.^a2
960104	Parliament reinstates a capital gains tax of 10-14% on stock market profits.^t
960302	Executive Yuan increased the ceiling on foreign ownership of total market capitalization from 15% to 20%, raised to 25% in December.^t
960323	Presidential election won by incumbent Lee, Teng Hui.^t
9603	Foreign individual investors and foreign companies other than QFIIs were permitted to trade in securities on the TAIEX (Taiwan Stock Exchange) and the OTC (over-the-counter) market.
9610	The benchmark short-term interest rate fell to a 22-month low of 4.5%.
9701	Central bank allowed money market rates to rise. Interest rate hike.
9704	The government encouraged large state-run commercial banks to sell shares. M1 money supply increased 14.4% since March.
9704	The Money Laundering Prevention Law was enacted.^a8
9705	Government took steps to give greater access to foreign banks in domestic markets.
9706	Currency fell to a nine-year low against the dollar; the central bank raised its rediscount rate to 5.25% from 5.0%
9707	Devaluation of the Thai Baht.
9708	Stocks rallied to a seven-and-a-half-year high amid strong interest for Chiao Tung Bank.
9708	Taiwan permitted domestic investors to trade in offshore Taiwan stock price index futures; the main vehicle for this trading was a contract introduced by the Singapore International Monetary Exchange (SIMEX).^a8
9709	The limit on how much of the net worth commercial banks can invest in stocks was raised to 20% from 15%. The central bank announced that foreign institutions investing less than $50 million no longer require central bank approval. President Lee Teng asserted the island's right to govern itself and seek international recognition in Panama.
9710	The government spent $5 billion defending the currency since the East Asian currency turmoil began on July 2. The central bank capped a rise in interest rates to a seven-year high on October 8, pulling overnight rates down to 9.5% from 11.5%. Cut in bank reserve requirement. The foreign limit on shares was raised to 30% from 25%. The predicted year growth was 6.6%.
9711	The local currency trading at 10-year low. The government has permitted the currency's depreciation as an export-boosting measure. The weak in Korean won pressured competition for the Taiwan's technology firms. The Yamaichi collapse.
9712	The poor election performance by Kuomintang Party in the local government elections on November 30 and the strong outcome for the opposition DPP. On December 3, the government decided to allow mutual fund companies and stock consulting firms to manage accounts for investors in 1998. The companies were allowed to buy back up to 10% of their shares. Exports reached an all-time high of US$ 11.41 billion in November. The government signaled to liberalize the financial markets.
9801	The currency fell to an 11-month low. Foreign net outflow was US$85 million.
9802	International optimism over the outlook for Asia. Foreign funs had a net inflow of US$ 692 million from Feb 1-9. Central Bank Governor Sheu Yuan-dong died and Patrick Liang was appointed acting governor. Government asserted that it would not lift restrictions on foreign ownership of property. On February 21, the Finance Minister announced new rules that lower the minimum deposit for borrowing stocks to 70% of their values from 90%.
9803	The Taipei government will rezone land for commercial use.
9804	Weakness of the Japanese yen overseas. Warmer U.S.-China ties could have an adverse effect on local economy. The futures exchange will begin trading in May, subject to parliamentary tax-exchanges.
9805	Concern about weak foreign demand for personal computers. The NT dollar weakened to $34.1.
9806	The weakening Japanese yen. The finance ministry lowered the collateral required on margin loans to 120% of the deposit before a margin call is triggered. S&P affirmed its AA+ sovereign credit rating, citing foreign reserves that exceed total short-term debt by about three to one.
980721	The Taiwan International Mercantile Exchange started operation. Initially, only stock price index futures were available for trading. Foreign investors are permitted to trade, though a foreign investor's trading volume may not exceed 30% of total inward remitted capital.^a8
9809	A “tick rule” was instituted, similar to one in Hong Kong, which prevented short sellers from aggravating index declines. Shares that are borrowed in a short sale may only be sold at a price at least equal to the last asking price.
9812	The ruling Nationalist Party emerged victorious form the December 5 elections. The Nationalists won 123, or 55% of the parliament’s directly elected seats.
9800	Laeven's banking liberalization (FLI) dates.^a13
9902	The last cut in the stock transaction tax occurred in February 1993, when it was lowered from 0.6%.
9903	Ministry of Finance announced that Foreign ownership limits in listed companies would be raised to 50% from 30%.^cc
990401	An easing of foreign ownership of TSEC-listed stocks from 30% to 50% became effective, a step toward liberalization.
9907	President Lee Teng Hui announced that cross-strait relations with the mainland should be "state-to-state", raising cross-straits relations. Morgan Stanley Capital International (MSCI) announced a further increase in the market weight of TSEC stocks in its Emerging Markets Free Index from 50% to 100%.
990921	A destructive earthquake (7.3 on the Richter scale) killed more than 2,300 people..
991022	A second earthquake occurred in the central part of the island, registered 6.9 on the Richter scale.
9910	MSCI would not only delay the increase in the Taiwan's weighting in its indices to 100% after Feb. 29, 2000, but increase the weight in three stages ending May 2001.
9911	The Ministry of Finance doubled the maximum amount that "qualified foreign institutional investors" might invest in any singular company to $1.2 billion.
200001	Chen Shuibian was elected as Taiwain President, but he got only 39% of the votes cast and his Democratic Progressive Party had only one-third of the seats in the legislature. A US$16.1 billion National Stabilization Fund was established.
200000	In the second quarter, scandals in the financial sector led to bank runs, forcing the Central Deposit Insurance Company to take control of two major institutions. The new government planned to reduce the length of the workweek and reform the pension system, but it was stymied by the legislature. The cabinet suffered from perceptions of inexperience, public disagreement, and policy reversals. The government tried to rein in the large fiscal deficit and the central bank raised key interest rates twice, slowing growth.
200007	The government proposed taxing stock bonuses and reducing tax benefits for high-technology industries. It also announced a package to boost the markets.
200008	The first deputy prime minister resigned. The opposition Kuomintang continued to criticize the government.
200009	The Central Bank attempted to tighten liquidity, but foreign portfolio outflows sent the New Taiwan Dollar (NTD) to its lowest level versus the U.S. dollar. Retail sales and consumer confidence posted largest declines.
200010	Prime Minister Tang Fei resigned on Oct. 3. The government imposed a limit of 3.5% per day drop and increased deposit margins on short positions to 120%. It further eased foreign investment restrictions and intervened in the markets through the NSF, but to no avail. Chung Hwa Telecom was privatized. Chen Shui-bian decided to close a nuclear plant and the incensed opposition parties pushed for his removal from office.
200012	S&P revised its outlook on Taiwan from stable to negative after a bad-loan crisis hit the financial sector. The central bank increased reserved rations for foreign currency deposits.
200101	The Central Bank cut interest rates. Taiwan's fourth nuclear power plant construction resumed.
200100	In the second quarter, the local stock market index, TAIEX, slipped to record lows. The Central Bank gave up defending the currency. To stabilize the markets, the government eased foreign investment instructions on securities, asked financial institutions to offer lower rates for securities purchases, and announced measures encouraging share buyback by corporates. It also proposed reforms to allow integration of banking, securities, and insurance companies.
200107	S&P lowered Taiwan's sovereign ratings.
200108	An all-party Economic Development Advisory Conference was established.
200100	During the fourth quarter, the government made a series of decisions lifting restrictions on Taiwanese companies to invest in China.
200112	President Chen Shui-bian's Democratic People's Party won the elections.
011204	Taiwan will formally become the 144th member of the World Trade Organisation (WTO) on the first day of 2002, following the endorsement of the accession documents by Taiwan's parliament
020107	the island is to allow a further 900 agricultural goods, including items such as tomatoes and onions, to be imported from the Chinese mainland. Coming on top of the 490 already permitted, this move will mean that more than half of the listed 2,092 agricultural products will be open to trade, though many of the most sensitive items grown by Taiwanese farmers remain off-limits.
020113	Energy Market Fully Opened in WTO-Linked Reform
020116	Taiwan's Legislative Yuan (parliament) yesterday passed a new Corporate Mergers and Acquisitions (M&As) Law, which, it is hoped, will help speed consolidation in the local business sector. Under the law, companies engaged in M&As will be exempt from stamp tax, deed tax, securities trading tax and business income tax, provided they meet the required criteria. Land incremental tax incurred through M&As may also be temporarily suspended. The costs of M&As may be offset as expenses for 10 to 15 years after the deal itself. Moreover, when the prices of properties, business operations or stock-swapping injected into a business are lower than their value, the resulting loss can be listed in a period of 15 years.
020220	Domestic banks posted their biggest-ever collective fall in profits in 2001, according to data released by the Finance Ministry. Hit by the economic slump and mounting bad loans, pre-tax profits for Taiwan's 53 domestic banks fell by 40.5% from a year ago to US$1.64bn, down from US$2.8bn in 2000. The profit slide marks the fourth consecutive year of shrinking profits in the sector.
020509	Two of Taiwan's leading state-run banks yesterday announced their intention to merge, in a move which will produce the island's biggest bank. CTB Financial Holdings, parent of Chiao Tung Bank and valued at around US$1.6bn, declared that it will combine with International Commercial Bank (ICB), valued at around US$2.3bn.
020628	the Central Bank cut its reference rate by 25 basis points. The discount rate moved to a record low of 1.875%. The move was undertaken to prevent appreciation of the Taiwanese dollar. Appreciation in Asian currencies has been associated with the fall of the US dollar in recent months. Rates were cut previously to offset an economic downturn.
020918	Direct investment by Taiwanese companies into China increased by 47%, on an annual basis, in the first half of 2002 to US$1.9bn, giving further evidence of strengthening economic ties between the two countries. The strong growth in foreign investment from Taiwan comes after an agreement in late 2001 when the Taiwanese government agreed to lift restrictions on local companies investing in China.
021001	The balance on the current account registered a surplus of US$4.96bn for Q3 this year. The result marked a sharp shrinkage from the record US$7.28bn surplus recorded in the first quarter of the year, but rose from US$4.23bn in the same period in 2001.
021102	The central bank cut the leading discount rate by a quarter-point on 11 November, to a record low of 1.625%. The move was widely expected after the US Federal Reserve moved recently to cut rates in that country by a stunning 50 basis points. In a statement, the central bank highlighted the ongoing weak state of domestic demand, despite the economy's return to positive growth
021121	The balance on the current account registered a surplus of US$4.96bn for Q3 this year. The result marked a sharp shrinkage from the record US$7.28bn surplus recorded in the first quarter of the year, but rose from US$4.23bn in the same period in 2001.
021219	the cabinet approved an NT$70bn (US$2bn) fiscal stimulus package to spur growth and reduce unemployment through public works. The injection of public cash was also aimed at combating the deflationary pressures currently stalking growth. The package will be financed through the issuance of additional government bonds. The government hopes that the projects will generate 115,000 jobs in Taiwan, helping to counter record unemployment of 5%.
030114	Moody's Warns of Ratings Ramifications if Taiwanese Bank Reform Delayed
030304	Financial sector regulators will favour overseas branch extension applications from domestic banks that reduce non-performing loan (NPL) ratios to below 2.5%, according to a report in the Economic Daily News. The move is designed as an incentive to accelerate the write-off of NPLs that still dog the banking sector. Following the write-off of a record NT$413.9bn (US$11.89bn) of bad loans in 2002, the NPL ration fell to 6.12% from 7.48% at year-end 2002.
030513	The government has confirmed that it has drafted legislation to provide emergency funding for businesses affected by the outbreak of severe acute respiratory syndrome (SARS) and to finance medical relief. The fund will be capitalised at T$50bn (US$1.44bn), with T$20.2bn (US$581.8m) set aside for corporate relief and the remainder to meet extraordinary medical costs. Debt issues will be used to finance T$43bn (US$1.24bn) of the fund's costs.
030820	The fiscal deficit is set to swell by 13% on the year in fiscal year (FY) 2004 to NT$257.4bn (US$7.5bn), the cabinet announced today. The widening shortfall will be generated as spending accelerates against a modest planned increase in revenues. In the budget framework, expenditure will rise by 3.9% to NT1.61trn (US$46.96bn), while revenues are set to expand by just 2.4% to NT$1.35trn (US$39.38bn).
031223	The Bureau of Monetary Affairs today announced that the average ratio of non-performing loans (NPLs) in the Taiwanese domestic banking sector fell from 5.33% to 5.01% between the end of October and the end of November.
040303	China Supersedes US to Become Taiwan's Leading Trade Partner
040322	Taiwanese President Chen Shui-bian has secured his re-election during Saturday's vote, but his razor-thin margin of victory, combined with controversy surrounding an apparent assassination attempt the day before the election, has prompted challenger Lien Chan to demand all ballot boxes be sealed ahead of a possible recount.
040401	US Move to Sell Military Equipment to Taiwan Irritates China
040614	Government Plans US$15bn Initiative to Boost Taiwan's Infrastructure and Services

Year	Regulations on Foreign Investors
1995	Restrictions: 1. Qualified Foreign Institutional Investors (QFII) are permitted to invest between $5 million-$200 million. 2. No more than 12% of total foreign ownership and 6% of individual QFII ownership. Total investment by a QFII is set at 12% of the total market capitalization. 3. A QFII's capital can be repatriated only after conversion into New Taiwan Dollars for 3 months. Once repatriated, it cannot be reinvested into the market without separate SEC approval. Earning may be repatriated only once a year. Repatriation of capital gains is not allowed until one year's investment in the market. Outward remittance does not enjoy free flow and is strictly overseen by the Central Bank of China. 4. Foreign investment is prohibited by law in some industries, and subject to an upper limit in others. Taxation: 35% dividend tax rate (maybe reduced to 20% of the investments were approved under the Statute for Investment by Foreign Nationals, and dividends may be added to a taxpayer's consolidated annual income with tax exempt savings for a deduction up to NT $270,000 ) and no tax on capital gains. ^{a5(first entry)}
1996	Restrictions: 1. Foreign individuals may invest up to $5 million a year in the stock market. Qualified Foreign Institutional Investors (QFII) are permitted to invest between $5 million-$400 million. 2. No more than 25% of total foreign ownership and 10% of individual foreign ownership. 3. No restrictions on the repatriation of capital and earnings, though overseen by the Central Bank of China. 4. Same. Taxation: 20% dividend tax rate (dividends may be added to a taxpayer's consolidated annual income with tax exempt savings for a deduction up to NT $270,000) and no tax on capital gains.^a5
2001	No change through 2001.^a5
2003	Chen announced a range of measures to ease restrictions on foreign investments in Taiwan's stock market, centred on the promise that the ceiling of US$3bn on investments by foreign institutional investors would be lifted. In the past, investment has been hindered by the government's desire to protect certain industries (especially those in which the former ruling party, the KMT, had a stake), such as finance. There are still some barriers to entry into these sectors, but these are coming down and, coupled with World Trade Organization (WTO) entry commitments, the liberalisation process is accelerating

last updated 7/10/04 by Jerome Mo, Duke Univ.

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No change through 2001.^a5

2003 Chen announced a range of measures to ease restrictions on foreign investments in Taiwan's stock market, centred on the promise that the ceiling of US$3bn on investments by foreign institutional investors would be lifted. In the past, investment has been hindered by the government's desire to protect certain industries (especially those in which the former ruling party, the KMT, had a stake), such as finance. There are still some barriers to entry into these sectors, but these are coming down and, coupled with World Trade Organization (WTO) entry commitments, the liberalisation process is accelerating

last updated 7/10/04 by Jerome Mo, Duke Univ.