Taiwan banking executives said a government decision to let China's banks open representative offices in Taiwan for the first time in five decades will benefit them as improved ties will spur the economy.
The decision extends the reach of Chinese lenders into a nation of 23 million people whose businesses have invested about US$100 billion in China, the world's fastest-growing major economy.
"This is absolutely positive and correct, helping not only Taiwanese banks but also helping finance Taiwanese companies investing in China," said Lee Chang-ken (李長庚), chief strategy officer of Cathay Financial Holding Co (國泰金控), Taiwan's largest financial group.
Kong Jaw-sheng (龔照勝), chairman of the Financial Supervisory Commission, said in an interview yesterday in New York that it's ready to consider applications for the offices.
The liberalization will help the Chinese authorities allow for some 10 Taiwanese banks upgrade their representative offices in China to branches that can do banking business to help finance Taiwan's companies in China, which is the island's biggest trading partner and largest export market.
"With the financing support from Taiwanese banks, Taiwanese companies can do a better job in expanding their businesses in China," said Michael Ding (丁予嘉), president of Fubon Asset Management Co (富邦投信)."
This will benefit not only the banking shares, but also the overall Taiwan economy and the stock market. Ding is also chief economist of Fubon Financial Holding Co (富邦金控), the nation's second-largest financial group by market value.
Kong said no applications have been received yet.
"If they send their applications, we will consider approving them," Kong said. "The next step is the branch office. If China agrees to do that, we don't see any problem."
The move raised concerns over whether allowing Chinese banks to come in Taiwan will pressure Taiwanese banks.
"We already have competed face to face with global giants like Citigroup," said Cathay Financial's Lee. "Although they have made progress, Chinese banks won't be an imminent threat because the Taiwanese banks' competitiveness is still slightly ahead."
In 2002, Chang Hwa Commercial Bank (
In the meantime, China has been eager to smooth the entry of its lenders into Taiwan. In November 2003, Chinese regulators agreed to allow China Merchants Bank (中國招商銀行), Industrial Bank Co (興業銀行), Industrial & Commercial Bank of China (Asia) Ltd (中國工商銀行) and Pudong Development Bank (浦東發展銀行) to establish offices in Taiwan.
Chinese banks with representative offices in Taiwan are allowed to gather information and conduct market research, Kong said. They can't lend money or take deposits.
"We need to consult with related ministries," he said.
The nation's central bank governor, Perng Fai-nan (彭淮南), said on May 26 that it's prepared to allow Taiwan lenders to offer foreign exchange services in the Chinese currency for the first time. That change, a precursor to widening the scope of business by Taiwan lenders in China, would require approval by Kong's commission as well as the Mainland Affairs Council.
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