HONG KONG: The Industrial and Commercial Bank of China (ICBC) yesterday issued 3.46 billion yuan in loans to Taiwan-funded companies in the eastern city of Suzhou. The loans represent Beijing's latest measure for providing financial aid to island enterprises operating on the mainland.

ICBC, the country's largest lender, signed an agreement in Suzhou, Jiangsu province to issue the loans to 15 Taiwanese companies. Among the companies were Nan Ya Plastics Corp and Giant bicycle manufacturer.

"The support is very timely and helpful, Taiwanese companies need financial aid more than anything else," said Tony Phoo, an economist at Standard Chartered Bank in Taipei. "Business costs on the mainland are higher than before."

Taiwan Affairs Office of State Council proposed 10 incentives in December last year, including 130 billion yuan in loans to Taiwan companies operating on the mainland. The moves were proposed to offset the effects of the global financial crisis which has eroded profit and dampened demand.

ICBC and the Bank of China will provide 50 billion yuan each, while China Development Bank will offer loans up to 30 billion yuan in addition to a previous offer of 30 billion yuan, the office said.

According to statistics from the Taiwan Affairs Office, Taiwanese businessmen have invested an estimated $150 billion on the mainland. Their companies have suffered falling profit margins on rising labor costs and falling demand amid the deepening global recession.

Taiwan companies will be able to access lenders' services from their home market. The mainland and Taiwan have agreed to create a supervisory mechanism that would effectively allow Taiwan banks including First Commercial Bank Co, Hua Nan Commercial Bank Ltd and five other lenders to upgrade representative offices on the mainland to full branches. Taiwan will allow mainland companies to bid for construction contracts on the island.

"Cooperation at this time is especially meaningful as the global financial crisis is spreading to the manufacturing industry," said Schive Chi, chairman of the Taiwan Stock Exchange.

Beijing also proposed to purchase $2 billion yuan worth of flat-panel displays from island companies.

"The purchase is an obvious support for Taiwanese companies," said Kao Koong-lian, deputy chairman of Taiwan's Straits Exchange Foundation (SEF)

"Now the Korean won is very weak, mainland companies can always go to Korean companies and get better priced products, but they decided to send orders to Taiwanese companies," he said at a seminar in Hong Kong last week.

(HK Edition 02/28/2009 page5)