Mainland Fever Attracting Taiwanese Intermediaries

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Last updated at: (Beijing Time) Thursday, July 04, 2002

Mainland Fever Attracting Taiwanese Intermediaries

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A growing number of banks, securities houses, law and accounting firms, and other intermediary businesses in Taiwan are following in the footsteps of the island's manufacturers to the Chinese mainland.

"Our clients are all here, that's why we can't afford not to behere," said Tsai-Tien Liang, deputy chairman of Diwan, Ernst & Young Management Consultants Ltd., a mainland branch of Taiwan's leading accounting firm of the same name.

According to Liang, as many as 80 to 90 percent of his firm's clients have invested on the mainland, and their investments are getting larger and larger every day.

"We will surely lose these clients if we can't serve them on the mainland," said Liang.

The firm's business on the mainland is so prosperous and thriving that Liang said profits from the city of Kunshan in east China's Jiangsu province is enough to support the whole firm.

Kunshan, a small city adjacent to China's rising economic and financial center Shanghai, has become one of the ideal mainland places with the most Taiwanese investment in recent years.

Taiwanese investors have set up more than 1,200 factories, including some 400 information technology firms, in the city.

Over the past half year, three Taiwanese intermediaries have moved to Kunshan. They are a branch office of the Chang Haw Commercial Bank, the Central Human Resource Development Co., Ltd. and the above mentioned Diwan, Ernst & Young.

Elsewhere, the United World Chinese Commercial Bank set up a branch office in Shanghai in May this year, while five other Taiwan banks are awaiting approval to open their own offices.

Mainland authorities have also approved branch offices for fiveTaiwanese insurance firms as well as 10 securities houses.

Still more Taiwanese law firms, accounting firms, and recruitment agencies are racing to land themselves in a better position once the door for the services sector opens fully.

Analysts noted that the rush of intermediaries is an indicationthat Taiwanese investment on the mainland has entered a new stage.

By the end of last year, mainland authorities had approved over50,000 Taiwanese-invested businesses, while actual Taiwanese investment reached nearly 30 billion U.S. dollars.

The mainland fever among Taiwan's traditional manufacturers hasaffected the island's hi-tech sector since last year. Almost all its major hi-tech firms have now invested on the mainland.

"At first there were those brave manufacturers, then came more of them, then the services firms will come, because to serve them is what we do," said Liang.

Lu Deming, director of the Taiwan Economy Research Institute inShanghai's Pudong New District, said although Taiwan's intermediaries were not very competitive internationally, they could develop hugely by serving Taiwanese businesses on the mainland.

That explains why these intermediaries have chosen to build their bridgehead in Shanghai and nearby cities and the Pearl Riverdelta, all intensively invested in by Taiwan firms.

Astute local governments on the mainland see a chance here to boost their investments from Taiwan.

Xie Ming, an official in charge of Taiwan affairs in Suzhou city, also in Jiangsu province, said opening the door to Taiwaneseintermediaries constitutes an important measure the city has resorted to in its effort to draw Taiwanese investment.

Further Opening of the services sector will prompt more Taiwanese intermediaries to move to the mainland, accelerating theprocess of redistributing labor across the Taiwan Strait, he said.

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