May 20, 2008
Taiwan-based Banks Ready to Tap Market in China
Taipei, May 19, 2008 (CENS)--With Fubon Financial Holding Co. approved to purchase a stake in Xiamen City Commercial Bank (XCCB), an array of Taiwan-based domestic banks are ready to follow suit to venture into the China market.
The banking sector and others in business believe that Taiwan-based banks will likely speed investment in China with Ma Ying-jeou, the newly elected president to be sworn in on May 20, having promised to further ease financial policy restrictions regarding Cross-Strait investment.
Yu Ming-te, executive director at the Taipei office of Pricewaterhousecoopers Financial Advisory Services Co., said that the market potential in China is huge and has recently been growing very rapidly, which has drawn many financial institutions worldwide to set up footholds there.
Yu estimated that the size of the corporate loan market generated by Taiwan-based businesses in China is between US$86.3 billion and US$172.6 billion, not to mention the potentially mammoth niche in credit card and wealth management segments.
Despite the often reported magnitude, promise of the financial market in China, some pioneering foreign banks there, including Hongkong and Shanghai Banking Corp., Citibank, Standard Chartered Bank, The Bank of East Asia, and The Bank of Tokyo-Mitsubishi, have so far been unable to generate significant profits, Yu pointed out.
He further estimated that the lowest capital needed to set up a bank in urban areas in China is around US$1 billion or about NT$30.5 billion; or over US$20 billion or about NT$610 billion in total assets if a bank plans to engage in foreign exchange business.
Fubon has spent US$34 million in purchasing a 19.9% stake in XCCB, if the former plans to be involves in the management of the latter, it has to invest even more capital. Yu disclosed that by end of 2007 foreign banks have invested some US$21.25 billion into local banks in China, which seems only a tiny drop in an ocean-sized bucket that is the financial market there.
Yu suggested, to tap the financial market in China, Taiwan-based banks should set up branches or purchase stakes in local banks there-targeting mid-sized banks with assets around 20 billion renminbi (RMB) or about US$2.86 billion each in Beijing, Tianjin, Shanghai, Shangdong Province, Zhejiang Province, Jiangsu Province, Fujian Province and/or Guangdong Province.
(by Judy Li)