Thu, Dec 04, 2003 page10

• Liberalization of yuan services is unhelpful: banks

  • By Jessie Ho / STAFF REPORTER
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  Beijing's announcement Monday about expanded Chinese yuan services may represent a blessing for foreign banks in China, but not for many Taiwanese banks as the liberalization may weaken their competitiveness there.

  "The liberalization measures have nothing to do with us," Hsieh Chao-nan (謝昭男), spokesman for Chang Hwa Commercial Bank (彰化銀行), said yesterday.

  "For the time being, we are not even allowed to start a business there. Therefore we may lose out to our foreign competitors over the policy," Hsieh said.

  To serve Taiwanese companies in China, Chang Hwa became the first Taiwan-based lender to open a representative office in China in May of last year.

  The representative office will allow the bank to monitor client's businesses in China, making it easier to assess loan requests. Chang Hwa could apply for an upgrade to full branch status next year, making it one of the first Taiwanese banks operating there.

  The Chinese Banking Regulatory Commission in Beijing announced on Monday that foreign banks in China that are qualified to provide local currency services to foreign customers would be allowed to further expand their services to Chinese enterprises in four more cities -- Jinan, Fuzhou, Chengdu and Chongqing -- on top of the original nine, including Shanghai, Shenzhen and Tianjin.

  The commission also raised the maximum stake that overseas investors can hold in Chinese banks from 15 percent to 20 percent as part of measures to help banks boost capital and sell shares to the public, in a move to fulfill the commitments China made when entering the WTO in late 2001.

  Foreign banks -- such as France-based BNP Paribas SA -- started offering currency services in China in 1997, but Taiwanese banks, however, are still marking time and certainly are not going to benefit from the proposed liberalization, Hsieh said.

  "Although we can apply to set up a branch in China in March next year as the Chinese authorities allow, whether the banking supervision issue can be resolved by that time is another problem," Hsieh said.

  Both the Taiwanese and Chinese governments have not yet reached a consensus on cross-strait banking supervision, which is a major obstacle for local banks to tap the Chinese market now, Hsieh said.

  Taiwanese banks with representative offices in China also include Cathay United Bank (國泰世華銀行), Hua Nan Commercial Bank (華南銀行), Taiwan Cooperative Bank (合作金庫), First Commercial Bank (第一銀行), Chinatrust Commercial Bank (中國信託銀行) and Land Bank of Taiwan (土地銀行).

  The government bars banks from offering yuan-denominated loans. But Fubon Financial Holding Co (富邦金控), the nation's second-biggest banking group, has seen the potential of the lucrative financing market in China. In September, Fubon bought a 55 percent-stake in Hong Kong's International Bank of Asia (港基銀行), in order to take advantage of the Hong Kong lender's license while opening branches in China.

  China is expected to completely open its currency services to all foreign banks in accordance with its WTO obligations in 2006. But that advantage may not apply to Taiwanese financial groups, an economist said.

  "By that time, Taiwanese banks will be competing with much larger foreign banking conglomerates in China. It will not help local banks as well," said Lee Jih-chu (李紀珠), an economics professor at National Chengchi University.

  Although being in an inferior position, Joseph Jao (饒世湛), executive vice president of Cathay United Bank, said he still believes Taiwanese banks will still capture a slice of the market in China.

  "We still have more advantages in language and cultural similarities than other foreign rivals," Jao said. "Besides, the huge number of Taiwanese businesspeople there will be a good customer base for us."
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