In The Context Of Ecfa, A Study On Opportunities And Challenges Faced By Mainland Banks After Entering The Financial Market Of Taiwan

With the increasingly frequent investments and trades between the two sides of the Taiwan Straits, and the expanding scale of bilateral trade, the economic relationship of Mainland and Taiwan becomes very close. Since1992, Mainland replacing the United States has become the largest trade surplus place of Taiwan. After that with the volume of trade between the two sides of the Taiwan Straits rising year after year, Mainland has turned into the largest trading partner and largest export market of Taiwan. But due to Taiwan always adopt strict limits on Taiwan’s financial industry; the financial transactions between the two sides of the Taiwan Straits are in the state of blank until1980s. After1990s, financial policies were gradually adjusted and relaxed by Taiwan which was forced by the pressure of economic development. As a result, a few financial exchange activities between the two sides of the Taiwan Straits started. As a result, the cross-strait finance, which provides financial services for investments and trades between Mainland and Taiwan, is at a standstill in the exchange and cooperation side for a long time. This situation is not good for the healthful development of the economic and trade relationship, but also for the peaceful development of cross-strait relations.In order to promote the development and cooperation of finance between the two sides of the Taiwan Straits, Mainland and Taiwan officially signed the Memorandum of Understanding for the cross-strait finance in November16,2009, indicating that the long-time closed cross-strait finance market has been officially opened from now on. And in June29of next year, the two sides of the Taiwan Straits officially signed Economic Cooperation Framework Agreement (ECFA). The third part of ECFA, Economy and Cooperation, put forward clearly the clause of strengthening financial cooperation, which symbolizing a new stage for the Cross-strait financial cooperation and exchanges. The relevant provisions of the ECFA and early harvest list firstly proposed that the mainland banks with permission could set up offices in Taiwan and establish branches after one year. At September7, Bank of China and Bank of Communication submitted the application materials of the office establishment to the Financial Supervisory Commission of Taiwan.16days later, the Financial Supervisory Commission approved that Bank of China and Bank of Communication could set up offices in Taiwan, which means these two banks get the opportunities to establish branches in Taiwan after one year.Because of the difference in the political and economic system, we have no idea about what opportunities and challenges the mainland banks will confront. To solve the problem, this paper will have a thorough analysis of the bank industry in Taiwan at first, including the development history of financial industry in Taiwan, the history of Cross-strait investment and financial business dealings, and the current situation of the local bank industry and foreign banks in Taiwan. Then on the ground of combining the theory of multinational banks with the actual situation of the cross-strait financial industry, we will find out what opportunities and challenges mainland banks will confront after entering Taiwan. And under the background of financial market of Taiwan, this paper also makes use of the SWOT Matrix to strategically analyze the strengths and weaknesses in the inside and outside of mainland banks. At last, this paper will propose suggestions in the short-term、 mid-term and long-term strategy for the mainland banks on establishment offices and branches in Taiwan.