In response to China's plans to cool its runaway economy, Taiwanese banks which plan to enter the Chinese market should seek strategic partnerships with Chinese banks to win a market share there, said Sophia Cheng (程淑芬), a senior vice president at Merrill Lynch Taiwan.
Cheng said that Taiwanese banks are too small to compete with Chinese banks even though their China-based units may initially target Taiwanese business-people, most of whom she said have built up relationships with Chinese banks.
"It may be difficult for Taiwanese banks to steal Tai-wanese clients from Chinese banks since they still need renminbi-denominated finances," Cheng told a seminar yesterday afternoon organized by Taipei Foundation of Finance (台北金融研究發展基金會).
Cheng also encouraged China-bound investors, including bankers, to re-calculate the cost of doing businesses for the next decade since both labor and the yuan are undervalued and likely to rise after that country goes through an economic adjustment phase in the near future.
While branching into China, local banks should also be encouraged to beef up their competitiveness through mergers and acquisitions domestically, Cheng said.
"Some Taiwanese bank should try to take up between 20 percent to 30 percent of market share," she said.
Panelists at yesterday's seminar unanimously agreed that China should be able to manage a soft landing since a hard landing would likely crash its economy.
Stock investors in Asian markets, therefore, had over-reacted to China's cooling measures after hurriedly dumping Asian shares including Taiwanese shares, they said.
"China's economic growth can be managed, but it can't be stopped," Cheng said, adding that China should be able to control its economic growth rate between 5 percent and 10 percent.
Sharing a similar view, Lee Mon-chou (
Lee lauded China's cooling measures as a pre-emptive move, saying that he expects its high-tech and service sectors to soon see a big boom.
However, he expressed concerns for China-based Taiwanese businesses since restrictions on investment, land and capital by Chinese authorities could hamper business development there.
As a result of rising operational costs, Lee said that many traditional Taiwanese businesses based in China's coastal provinces are planning to move inward to take advantage of cheaper labor and land.
Although there are few signs that China may allow the yuan to float, Central Trust of China (
Letting the yuan appreciate is key to resolving all of China's economic problems, he said.
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