Chinese and Taiwanese banks---Finally thinking Strait (2/2)

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An even bigger opportunity for Taiwanese banks in China, however, may be locally owned small and medium-sized enterprises (SMEs) and [---①(word)---], which are not served well by China’s big state banks, says Jeffrey Wong, managing partner in Taipei for McKinsey, a consultancy. Instead they often have to resort to illegal underground lenders. Taiwanese banks, which have experience with SMEs at home, could well provide a legal alternative. More Taiwanese banks are set to follow Fubon’s trail. Cathay United, Taiwan Cooperative Bank and Chinatrust Commercial Bank are said to be interested in Fuzhou City Commercial Bank, another larger city in Fujian province across the strait.

There are still plenty of [---②(phrase)---] to overcome. Firstly, China does not officially recognise Taiwan’s government, or any of its agencies—which complicates any direct negotiations over the banking industry. Meanwhile, the FSC bans Chinese banks from setting up operations or investing in Taiwan, though it revealed in June that it may reconsider that stance.

[----------③(sentence)----------]This would help them to follow their Taiwanese clients who bank with them on the mainland. Also, Taiwan’s population of 23m is similar in size to the prosperous economic clusters in China, and arguably more sophisticated. Mr Wong believes that Chinese banks may consider using Taiwan as a test platform for more advanced products, such as [---④(phrase)---].

More financial integration across China, Taiwan, Hong Kong and Macau, is “[---⑤(word)---]” says Mr Wong. “The question is not if, but to what degree”. The region already shares supply chains, sales channels and human resources (with the exception of Chinese nationals working in Taiwan). Cross-border banks could offer a single service to clients that have, for instance, a factory in China, a sales office in Hong Kong and a research centre in Taiwan.

Meanwhile, other financial dealings with China are fast being liberalised in Taiwan. This month the cabinet moved to relax restrictions on mutual-fund investments in Chinese stocks. Taiwanese banks have been allowed to trade the yuan for the first time since the Communist revolution. [----------⑥(sentence)----------], said the Chinese philosopher Laozi. What is needed now is a big leap across the Taiwan Strait.