An Analysis Of Cross-Strait Financial Cooperation

Cross-strait finance is a significant part of cross-strait economy. A majority of people believe that cross-strait financial cooperation effectively contributes to the development of cross-strait economy. Since2009, with the endorsement of some basic framework agreements such as Economic Cooperation Framework Agreement (ECFA) and Cross-strait Financial Supervising Cooperation of Memorandum of Understanding (MOU), cross-strait financial cooperation is now stepping into a precious growing period which includes many unprecedented developing opportunities. However, there are some structural problems such as the asymmetries of cross-strait financial institution, financial supervising information and financial openness, which will delay the development of cross-strait financial cooperation.This article chooses an indicator to stand for cross-strait financial cooperation through Principal Component Analysis (PCA), and then analyzes the monthly data which stand for cross-strait finance, trade and investment from January,2012to December,2013by Vector Auto-Regression (VAR) model. It turns out that firstly, the result of Johansen Test indicates the existence of long-run and stable relationships between cross-strait financial cooperation and cross-strait trade&investment. Secondly, the Impulse Response Analysis manifests that the relationships between cross-strait financial cooperation and the development of cross-strait finance, trade&investment are feeble in short-run. Thirdly, the conclusion of Variance Decomposition tells us that the development of cross-strait financial cooperation mostly rely on that of cross-strait finance. Finally, based on the consequence of Granger Causality Test, there are no statistical causal relationships between cross-strait financial cooperation and cross-strait trade&investment.These conclusions follow this article’s assumptions and expectations and reflect the objective situations of cross-strait financial cooperation. Up to now, cross-strait financial cooperation remains on a primitive stage. The channels which interact with each other between cross-strait financial cooperation and cross-strait trade&investment have not been built. It is impossible to make positive interactions under the primary stage of the development of cross-strait financial cooperation at the moment, which weakens the boost to cross-strait economy. Meanwhile, it means that what roles the cross-strait financial cooperation should play are still not fully playing out. It also signifies that cross-strait financial cooperation has great developing potential in the future. Therefore, under the framework of ECFA and MOU, both sides of Taiwan Strait should take various measures to promote the further development of cross-strait financial cooperation together in the fields of financial service, financial regulation and monetary policy.