Lending to Taiwan companies rises

Major mainland banks have been eyeing opportunities in Taiwan as cross-Straits ties improve.

Bank of China (BOC), the nation's third largest bank by market value, has agreed to offer a 9.3 billion yuan credit line to 12 Taiwan-based companies operating on the mainland.

Industrial and Commercial Bank of China (ICBC), the world's largest bank by market value, extended 8.46 billion yuan worth of new loans to 303 Taiwan-based firms that have a presence on the mainland in the first two months of this year.

Most Taiwan-based companies with plants on the mainland have struggled with shrinking orders since the start of the global financial crisis, which has dampened global demand for the hi-tech products that are one of their specialties.

To improve cross-Straits financial relations and help the struggling Taiwan-based companies combat the global economic downturn, China Development Bank, ICBC and BOC promised to provide 130 billion yuan worth of credit over the next three years to Taiwan-based firms operating on the mainland, the banks said at the Fourth Cross-Straits Economic, Trade and Cultural Forum held in December last year.

The 12 Taiwan-based firms that obtained credit lines from BOC included the world's largest maker of PC monitors, TPV Technology, which received a 4 billion yuan credit line from the bank.

"The global financial crisis has hurt most companies deeply and TPV Technology is no exception. But we're no longer worried about not being able to secure enough credit from mainland banks. We have obtained $2.6 billion worth of loans from mainland banks, which accounts for about 60 percent of our total credit," said Chen Zhaoming, who oversees financial management at TPV Technology.

According to a top official with the Taiwan Affairs Office of the State Council, major mainland banks lent 230 billion yuan to Taiwan-based companies in 2008. ICBC lent 40.5 billion yuan while BOC lent 45.9 billion yuan.

While unveiling BOC's plan to provide 9.3 billion yuan of credit to Taiwan-based firms, BOC president Li Lihui also revealed the bank's ambitions to expand its presence in Taiwan by becoming the first mainland bank to set up a branch there.

"Establishing a branch in Taiwan is one of the most important tasks for BOC this year. We have begun preparations and have developed a network of potential customers," said Li.

BOC is awaiting approval from the government and doesn't have a timetable on when its first branch in Taiwan will be open, a spokeswoman of the bank said.

A spokesman from ICBC also confirmed that the bank had plans to set up a branch in Taiwan without elaborating.

China Construction Bank, the country's second largest lender by market value, said it didn't have plans to tap the market in Taiwan since the bank just received licenses for its branches in New York and London this year.

Improving cross-Straits relations mean banks from Taiwan might also have a chance to penetrate the mainland market later this year.

A historic cross-Strait financial services agreement will likely be signed in May or June, enabling Taiwan-based banks to access the massive market on the mainland, Reuters reported earlier this year.

The mainland will increase financial cooperation with Taiwan during the global financial crisis, Premier Wen Jiabao said last month.

Taiwan enjoys strong language and cultural ties with the mainland and is home to Asia's fourth biggest banking market. Despite those advantages, its banks are years behind global giants such as HSBC and Citigroup, due to obstacles that have so far kept Taiwan-based banks out of the mainland.

But nearly all of Taiwan's top corporations, from chip leader TSMC to petrochemical powerhouse Formosa Plastics and electronics giant Hon Hai have major operations on the mainland that require billions of dollars to finance.

"Corporate banking is a business where banks can make profits in the near term," said Liu I-cheng, a senior vice-president of Cathay, which is Taiwan's top listed financial holding firm and will likely be among the first firms to set up shop on the mainland.

"It is possible for a bank to reap earnings of 1-2 billion New Taiwan dollars a year," said Liu.

Chang Hwa and units of First Financial and Hua Nan will also be some of the first companies from Taiwan to push into the mainland.

Agencies contributed to the story

(China Daily 04/20/2009 page4)