Capital injection, stakes and subsidiaries next most favored

TAIPEI: The most direct way Taiwan's banks intend to invest on the mainland will be to set up branches there, according to the results of a survey conducted by the Taiwan Academy of Banking and Finance (TABF).

Just over a third of the financial institutions surveyed (33.5 percent) said setting up branches was the fastest way to gain a foothold on the mainland, while nearly a quarter (24.7 percent) said it would be best to buy a stake or inject capital into an existing bank there.

The third and fourth most cited options were setting up subsidiaries, mentioned by 18.3 percent of the respondents, and forming strategic alliances, which 15.4 percent said would be their preference.

Lee Chih-jen, TABF deputy director, unveiled the survey on the trends in domestic financial service institutions, at a seminar on the subject.

The survey found that with the opening of the cross-Straits financial sector, Taiwan's financial service companies very much want to invest on the mainland, with financial holding companies being the most aggressive. Local banks are also eager to cash in on the opportunity, as indicated by 83.7 percent of the respondents.

The survey found that these banks and companies are primarily motivated by the desire to serve the needs of Taiwanese investors based on the mainland and by optimism over the "tremendous potential" of the mainland market.

With the overall environment now conducive to cross-Straits cooperation, Taiwan's banks are considering diverse strategies to make inroads into the mainland market, Lee said.

The most popular location for Taiwan banks looking to set up mainland footholds is the Yangtze River Delta, as indicated by 85 percent of the financial holding companies and 60.4 percent of the banks in the poll.

The second choice is the Pearl River Delta, picked by 18.6 percent of the respondents for similar reasons.

The survey indicated that the Taiwan financial sector would follow in the footsteps of Taiwan businessmen in the initial stages of tapping into the mainland market.

Some 39.6 percent of Taiwan banks and 33.9 percent of financial service operators said they will make their investment decisions based mainly on the policies of related agencies, mainland financial regulations and the terms of a proposed cross-Straits economic agreement.

Asked whether Taiwan's opening to mainland banks will pose a threat to domestic operators, 70 percent of the financial holding companies and 51.1 percent of the banks said that "there will be some impact, but the move will not pose a big threat." Taiwan's financial market has long been very competitive, therefore its financial services have become homogenous, Lee noted.

However, according to 44.1 percent of Taiwan banks, "the impact will be obvious, although it will not pose a threat to local operators" because of the diverse commodities of financial holding companies.

Meanwhile, following the signing of a memorandum of understanding between Taiwan and the mainland on financial supervision cooperation, nearly 60 percent of Taiwan banks said they have the edge in terms of "service experience, "promotional ability," and "access to Taiwan businessmen."

In the area of human resources, 57 percent said Taiwan advantage lies in "professionalism of its clerks" and "good work attitude".

Taiwan banks operating on the mainland would have the edge in three main areas, the respondents said, listing "corporate finance", "consumer finance" and "VIP asset management".

China Daily/CNA

(HK Edition 01/27/2010 page2)