Chinese authorities are aggressively seeking cooperation with Taiwanese banks to establish joint venture financial institutions in China in the run up to the Middle Kingdom's WTO entry.
A local Chinese-language newspaper quoted unnamed sources in Taiwan's financial sector as saying that China is wooing Taiwanese financial institutions to China in another step toward improved cross-strait financial interaction.
The Ministry of Finance has lifted the ban on Taiwanese financial institutions from setting up representative offices in China, although only nine local banks are eligible to apply because of stringent requirements set by the government.
The report said Chinese officials are concerned that their state-owned financial institutions are not prepared to face international competition following WTO entry. Four state-owned giants control more than 70 percent of the market in a country with only one private financial institution -- Minsheng Bank.
As a result, the Chinese government may be interested in encouraging joint ventures in the sector, adding Taiwanese capital and financial professionals from Taiwan.
China may encourage the interaction in two ways, the paper said. First, Taiwanese financial professionals would train their counterparts in China. Second, Taiwanese financial groups may invest capital in new financial institutions in China managed by returning skilled professionals with a Chinese background.
In fact, China already has one Taiwanese-invested institution in Shanghai -- Hua Yi Bank (華一銀行) -- set up with the goal of serving Taiwanese investors in China. Most of the staff at the bank are from Taiwan.
California-based Far Eastern Bank, which is now owned by Bank Sinopac (華信銀行), also has a branch office in Beijing.
On May 30, the Executive Yuan revised laws governing investments in China by Taiwanese financial institutions, which led to lifting the ban on banks establishing representative offices in China, provided they meet certain criteria. Only the top 10 banks in terms of both asset value and net worth are allowed to establish offices across the Strait, according to a proposal made by the finance ministry and the Mainland Affairs Council.
Other criteria include the capital adequacy ratio of the bank, which must be above 8 percent; the bank must already have an overseas representative office or overseas branch; it must posses international banking expertise; and it must not have violated important banking laws and regulations in the last three years.
Among the nine banks eligible to apply are the Bank of Taiwan (台灣銀行), the Land Bank (土地銀行), Taiwan Cooperative Bank (合作金庫), First Commercial Bank (第一銀行), Hua Nan Commercial Bank (華南銀行), Chang Hua Commercial Bank (彰化銀行), United World Chinese Commercial Bank (世華聯合商銀), Chinatrust Commercial Bank (中國信託商銀) and the International Commercial Bank of China (中國國際商銀).
Sources said that several financial institutions, including Chang Hwa Bank, are interested in applying when the finance ministry starts accepting applications for representative offices beginning tomorrow.
Sources said that the representative offices, which are not allowed to offer deposit and lending services, may not be of much help to Taiwanese investors in China.
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