Ever since the Economic Reform led by Deng Xiaoping started in the late 70s, the high annual growth rate has attracted huge inflow of foreign investments. This paper focuses on the background and the associated advantages and disadvantages of extending Taiwanese banks to China. We concluded:
1. The reasons that the Taiwan-based banks are allowed to operate in China are to absorb more foreign funds , to help developing the non-saving related areas and training international personnel , to strengthen the local banks’ competitiveness . Besides, they can learn from Taiwan experiences and there’s no language barrier.
2. What interests the Taiwanese banks entering China are economics globalization, the convenience of ICT communication technology, the potential niche of individual finance, and to move into the Chinese market with huge potential client base before the other foreign banks started.
3. The two most common methods for Taiwanese banks entering China is either setting up branches or subsidiaries or with the collaboration with other foreign banks.
4. The insufficient financial supervision however might pose as a difficult task to handle. Other than that the worsen budget deficit, unpredictable cross-straight policies , the tight control of the government, unhealthy stock market and undeveloped derivatives are also concerns.
5. There are issues that Taiwanese banks need to address within its organization. For example the piling bad-debts from the credit card sector and its social responsibilities, board members abuse to use the personal loan, high market shares of state-owned banks. Besides there are too many similar financial institutions and most of them are small and lacking of international competitiveness.
6. The advantages that the Taiwanese banks in China have are the Taiwanese businessman who works in China, the similarity in language communication 、 system and culture. The management skills are more modern than the local banks.
We analyze with the 4P method to conclude the best strategies for Taiwanese banking sector entering China are to reform the organization, to best mach the job assignments, to broaden the distributions, to extend its operation, to strengthen the abilities of marketing and services , to increase the profitability, and to use the best talents.