The ECFA was signed by Taiwan and Mainland China on June 29, 2010. It is Taiwan’s new overall national economic policy calling for rapproachment with Mainland China. A primary purpose of this Agreement is to establish a quasi national cross-strait common market within the framework of the WTO as well as to design the legal framework of bilateral economic cooperation. It is a course for the Chinese common market as the final economic integration. By its nature the current ECFA lies somewhat between a free trade agreement and a bilateral trade agreement within the framework of the WTO in the sector of trade in goods. Two parties have agreed on a new model of preferential treatment for goods exported from Taiwan to Mainland China. An agreed Early Harvest for Trade in Goods list is favourable for Taiwan, while an Early Harvest for Trade in Services list is balanced one for both parties. Other principles formulated by the ECFA are related to intellectual property rights and mutual investment. The success and failure of the ECFA will depend largely on the future cross-strait political atmosphere.

After careful deliberation and through rounds of talks, the Chinese mainland and Taiwan signed the Cross-Straits Economic Cooperation Framework Agreement in 2010. This agreement is viewed by many across the straits and around the world as an agreement with great implications not only for economic issues, but also for political interactions between the two sides. Moreover, as the two sides of the ECFA are WTO members, legally, the relevant rules concerning free-trade agreement under of the WTO regime are applicable to the ECFA. This article will give a brief analysis on the economic, political and legal aspects of the ECFA.

The purpose of this study is to investigate whether the ECFA impacted the efficiency of banks in China and Taiwan from 2008 to 2017. This study follows Seiford and Zhu (2002), who recommend using the standard data envelopment analysis model to measure performance by increasing the desirable outputs and decreasing the undesirables. The finding was that overall technical efficiency increased from 2012 to 2017, reaching 0.575, 0.652, 0617, 0.689, 0.701 and 0.74, respectively. This result implies bank efficiency did indeed improve after China and Taiwan signed the ECFA cooperation agreement. The study found that the mean technical efficiency was 0.8756 in China, greater than Taiwan’s mean of 0.3511, implying that Chinese banks experienced a greater increase in efficiency after signing the EFCA. One possible reason explored in this study is that China’s economy is currently growing at the highest rate in the world, and the banks’ efficiency has benefited from greater economic growth. This suggests that cross-strait sustained negotiations to consummate an agreement on trade in the services will be a very important mission in the future. This result also provides significant evidence suggesting that not accounting for undesirable output while estimating the evolution of the model may seriously distort efficiency results.