Cross Strait

Mixed messages

Taiwanese banks for sale, but not newspapers

Mixed messages

Expert on rocks and hard places

You can own a little more of our banks, but stay away from our newspapers. That was the message for mainland China this month, as the Taiwanese sent conflicting indicators across the Strait.

First the more welcoming step, with Taiwan’s regulators announcing that mainland Chinese banks are to be allowed to buy bigger stakes in the local financial sector. The new rules allow shareholdings of up to 10% in listed Taiwanese banks, 15% in unlisted ones and 20% in banking units owned by listed financial holding firms in Taiwan.

Previously the limit was 5% for a single investor and 10% for all mainland concerns combined, putting off investor interest from most parties. But a day after the rule changes were announced, financial giant ICBC announced that it planned to buy a fifth of Bank SinoPac in the first investment by a mainland lender on the island. The purchase is now awaiting regulatory approvals.

Previous articles in Week in China on cross-Strait ties have focused on enhanced trade (the ECFA trade deal in WiC67) or the political mood (improved by the re-election of Ma Ying-jeou – see photo above – as Taiwan’s president last year; see WiC135).

But the current focus seems to be more financial in tone. In return for the reduction in shareholding caps, Taiwanese banks are being promised more rapid approvals for expanding their own operations in China, where they are attracted by higher interest margins than at home. And in February, they were also given the opportunity to follow counterparts in Hong Kong by clearing trade transactions directly in the renminbi. The main benefit from direct clearing is that Taiwanese companies can invoice and settle their mainland-related trade directly in the Chinese currency, rather than having to swap first into the US dollar and then into the New Taiwan dollar. But it will also allow local firms to raise funds in renminbi to fund their investments and operations on the mainland.

Still, the implications for deeper financial integration weren’t greeted with universal acclaim, following warnings in the Taipei Times of the potential annexation of Taiwan’s financial sector by mainland interests.

One of those sounding the alarm was Qiu Junrong, a professor from National Central University. Qiu acknowledged that Taiwan’s banks wanted fuller participation in the mainland’s financial market in return. But he queried whether they would be able to grab much business in a sector dominated by the four leading Chinese banks (other foreign lenders, he noted, have struggled to assert themselves in the sector).

Taiwan’s banks are desperate to establish more of a foothold on the mainland because of frenetic competition at home, where nearly 40 domestic financial institutions battle to attract business from a population of just 23 million.

But a similar instinct for closer ties was much less apparent in Taiwan’s media industry, after the collapse of a bid from a consortium with extensive mainland contacts for Taiwan’s most popular newspaper, the Apple Daily.

Part of the Next Media Group owned by Hong Kong billionaire Jimmy Lai, the Apple Daily is known for a more outspoken, anti-Beijing tone. By contrast, Tsai Eng-meng, head of the family said to be driving the failed takeover, is a prominent supporter of Beijing. The chairman of Want Want Holdings, a local conglomerate that started out as a snack food firm, Tsai owns other media holdings including the China Times, which was fined last year for carrying editorial content paid for by the Chinese government.

Last year Tsai again made headlines by telling The Washington Post that he hoped for speedier unification with China. This stirred further opposition from the civic group ‘Youth Alliance Against Media Monsters’, which has tapped into concerns that pro-Beijing voices could establish monopoly power within the island’s media.

The protest group – which has a Tyrannosaurus Rex as a symbol and campaigns on the slogan “You’re very big, but I’m not afraid” – enlisted wide support in Taiwan by noisily opposing the deal, leading the consortium to drop its Apple Daily bid at the end of March.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.