Friday, February 23, 2007

The Missing Link

Big banks eye Taiwan's finance market
Jonathan Adams
Newsweek International, November 6, 2006

For the past few years, global banking giants have been circling Taiwan, looking for a way in. Finally, one of them pounced. Last week Britain's Standard Chartered confirmed it had gained a majority stake in Taiwan's Hsinchu International Bank in what's at least a $1.2 billion deal. It's the first takeover of a Taiwanese bank by a foreign company, and gives Standard Chartered a foothold in Asia's fourth largest banking market. Hot on its heels, HSBC and Citigroup are now also reported to be in talks with smaller, private banks in Taiwan. (Both companies declined to comment.)

So what's the big attraction? In recent years, Taiwan's banks have successfully reduced their bad loan ratios from more than 11 percent in 2002 to about 2.4 percent in late August. They're also now at bargain prices, according to analysts. But there's more to it than the banks themselves. Analysts say that Standard Chartered is trying to tap an often overlooked chunk of the Chinese banking market: some 1 million Taiwanese work or live in mainland China and the island has pumped at least $100 billion into the mainland's booming economy since the late 1980s. Taiwanese banks can't open branches in China, and vice versa—which leaves an opening for foreign players to provide a more efficient banking link. The road to riches, it would seem, goes through Taiwan.

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