A Taiwan legislative subcommittee voted on Thursday to let local banks set up branches in China, sending financial shares higher on the prospect of access to the huge mainland market.
But any such opening still has to be approved by the full internal affairs committee and the financial regulator, as well as by China, which views Taiwan as a renegade province despite booming business ties between the two sides.
The subcommittee on internal affairs approved the move in a morning meeting, said lawmaker Lee Jih-chu, a member of Taiwan's opposition Kuomintang (KMT) Party, which favours stronger trade and business links with China.
"Taiwan banks would not have to be stuck in the Taiwan market anymore. They could go to a market (China) where they are competitive," Lee told Reuters by phone.
"If the governments of Taiwan and China agreed to sign a memorandum, not only can Taiwan banks open branches in China, but they can also buy a stake in mainland banks."
The approval would open the door for Taiwan lenders, whose combined revenues ranked number four in Asia last year, to enter the huge Chinese market. In a statement issued late Thursday, the Mainland Affairs Council, a cross-strait policy-making body under the Taiwan government, said the approval was "very inappropriate".
The latest move was well received by Taiwan banks, which have struggled with a saturated home market and high bad consumer debts.