Merger mania sweeps Taiwan as state-run banks consolidate

This article was written by Bowun Jhu and published by the Taiwan Journal on December 2, 2005. It reports that the Bank of Taiwan and the Central Trust of China will be merged in 18 months and become Taiwan's largest financial institution. The two banks are both state-run and handle a wide range of business operations such as banking, insurance, securities and trading. Their integration is expected to be a benefit to the business and financial environment in Taiwan.

The government considers the merger a major breakthrough in its attempt to halve the number of state-run banks from 12 to six by the end of 2005. Its goal is to consolidate the scores of lenders in Taiwan so that they can compete with foreign banks that are gathering market share around the island.

In recent years, Taiwan is increasingly looking to the service industry, particularly the financial sector, for economic growth. Traditional industries such as manufacturing are losing their prominence because most companies choose to move their production facilities to China where labor is cheaper.

The service industry now contributes around 70 percent of Taiwan's GDP growth. It is expected that the financial sector's contribution to Taiwan's GDP growth would rise to 13 percent in 2006, from 12 percent in 2005.

More detailed information about the liberalization and consolidation of Taiwan's banking and financial sectors is provided in this article.