Wed, Dec 03, 2008 - Page 12 News List

Bank opening to PRC may lead to huge fund outflow

By Joyce Huang  /  STAFF REPORTER

Once the government gives the green light, most local banks will be able to move into the Chinese market “within three months,” resulting in a capital outflow of up to NT$300 billion (US$8.96 billion), a banker told a cross-strait banking seminar in Taipei yesterday.

Simon Dzeng (曾垂紀), an executive vice president at Mega Financial Holding Co (兆豐金控), said that his company, along with many of its domestic peers, was ready to tap into China’s market should a memorandum of understanding be signed early next year between Taiwan and China to facilitate China-bound investments.

Mega Financial recently resubmitted its application to the Financial Supervisory Commission (FSC) for approval to set up a liaison office in Suzhou in preparation for expanding its presence in China and serving its Taiwanese business clients there, Dzeng said.

He said Mega Financial would seek to expand its presence in China by establishing a liaison office first in Suzhou and then upgrading it into a branch office or taking a stake in Chinese banks.

To funnel cash for its China-bound investment, Mega Financial plans to liquidate its 13.4 percent stake in Taiwan Business Bank (台灣企銀), which cost the bank NT$6 billion in 2005.

To strengthen cross-strait financial cooperation, Dzeng urged financial institutions across the Taiwan Strait to team up with Taiwanese banks to tap into China’s investment banking business — which foreign banks used to dominate — and explore emerging business opportunities.

Daniel Wu (吳一揆), chief investment officer of Chinatrust Financial Holding Co (中信金), supported enhancing cross-strait cooperation, but said that the biggest hurdle at present was ending political hostilities between the two governments.

For example, he said, neither Taiwan nor China fully recognize each other’s currency, adding to the difficulties and cost of currency conversion.

The lack of a government-to-government currency-clearing pact forces domestic banks to seek the help of banks in Hong Kong to exchange the two currencies, which cost local banks extra transaction fees, Wu said.

FSC Vice Chairwoman Lee Jih-chu (李紀珠) also advised both countries to seek further cooperation to enhance their international competitiveness amid the global challenges that could affect their export performance.

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