Taiwan-based CTBC Financial Holdings and China's CITIC Bank Corp have canceled their plan to invest in each other's company amid on-going political tension between both countries.

However, both companies have stated that there is no political motive for the cancellation of the project, instead they citied regulations and other issues as the cause, Reuters reported. Both firms said in a statement that the deal was canceled as more than a year has passed since they signed the contract.

Like Us on Facebook

Sun Deshun, executive director of China CITIC Bank, quashed the rumors of political tension being the main reason behind the collapse of the deal. Speaking at a press conference in Beijing, Sun said, "There is not a single political element to it. We are a commercial bank. We can't play a leading role in politics."

Sun claims that discrepancies in financial regulatory policies in both countries and the inability to reach an agreement on key commercial terms were the main reasons for the cancellation of the deal.   

However, several industry experts blame the current political acrimony between both nations for deal's collapse.       

"The overall environment is not good. These two firms are politically aware ... They knew the deals would not gain regulatory approval given the current political climate," said a PricewaterhouseCoopers executive on the condition of anonymity.        

In May last year, CTBC and China CITIC Bank Corp struck a deal, with CTBC agreeing to pay T$11.67 billion ($368.63 million) to acquire a 100 percent stake in one of the subsidiary firms of China CITIC Bank Corp. In exchange, China CITIC Bank Corp was supposed to buy a 3.8 percent stake in CTBC.    

Political Tension Between China and Taiwan  

Ties between China and Taiwan have been strained ever since Tsai Ing-wen won Taiwan's presidential election in a landslide victory earlier this year. Tsai is from the pro-independent Democratic Progressive Party (DPP), which does not acknowledge the "One China" principle professed by mainland China.

The "One China" principle states that China and Taiwan are one country. Taiwan claims that this principle impinges on its sovereignty. The island nation separated from China in 1949, following a prolong civil war.

TagsCTBC Financial Holdings, China CITIC Bank, china, Cross-Strait relation, Taiwan, China and Taiwan