Taiwan's Fubon wants rural bank business in China

Fubon Financial is considering opening rural banks in China in an effort to tap the mainland's fast-growing rural economy.

Fubon, which has formed joint ventures with China's Citic Group and Founder Securities, would join global giants like Standard Chartered to compete in the sector as the mass market was already dominated by the "Big Four." Among them were Bank of China and Industrial & Commercial Bank of China.

The current Chinese policy to encourage banks to offer loans to small companies and individuals and the tough competition in major cities have prompted foreign banks to set up branches in rural areas.

"We are evaluating the possibility to set up rural banks on the mainland," Fubon president Victor Kung told reporters after an investor conference, adding no details were available.

"The competition in Taiwan makes it difficult for banks. Our net interest margin is still under pressure this year in spite of the economic recovery," Kung said.

While Fubon may get some advantages from Chinese authorities thanks to warming trade ties across the Taiwan straits, some analysts see challenges ahead.

"Rural banking presents an opportunity for Fubon, but there are also many difficulties," said Kin Lin, an analyst of China's Orient Securities Co.

"It will be a long journey for Fubon to establish and cultivate the kind of clients they want. It will also take them years to build smooth connections with local governments," said the analyst.

You can read the full story at Reuters.com.