One of Taiwan’s largest lenders is shifting its business and hiring focus to Southeast Asia as its corporate clients in high-tech and textile manufacturing seek to diversify supply chains away from China amid geopolitical tensions.
Cathay United Bank Co (國泰世華銀行) from 2020 to last year boosted headcount in Vietnam by 75 percent and increased hiring by more than a third in Singapore, according to Benny Miao (苗華本), the head of Southeast Asia for Taiwan’s second-largest lender by assets, which is a part of Cathay Financial Group Holding Co (國泰金控).
The lender’s expansion plans have “literally switched positions” with China, Miao said in an interview, pointing to Vietnam, Indonesia and Cambodia as focus countries.
Photo courtesy of Cathay Financial Holding Co
“We’re looking at where else our customers are going,” he said. “That’s a large component of what’s going to determine what we want to do and how big of an investment we’re going to make in each of these relative markets.”
The moves come as suppliers in Asia are under pressure to diversify production lines away from China — the “world factory” home to the majority of manufacturing capacity for everything from sneakers to smartphones.
The shift emerged during the US-China trade war in 2018, and has intensified in the aftermath of COVID-19 and increased geopolitical wrangling.
“Economically speaking, China is still a market,” Miao said. “But more and more attention now is focused elsewhere.”
Taiwanese companies, traditionally among the biggest investors in China, have also been pulling back because of increased competition and rising labor costs. More recently, manufacturers have been moving out because their customers are asking for diversification away from China, which is accelerating the shift, Miao said.
“A lot of their buyers are either European or American, so they’re giving them instructions that say, ‘I need you to do plus one,’” he said, referring to the business strategy of avoiding only investing in China. “I think that’s what’s really driving it.”
Cathay’s moves are in tandem with a measurable shift away from China by Taiwanese banks, which have slashed their exposure to the world’s second-largest economy to the lowest level in at least a decade. Total lending, investments and interbank transactions in China by Taiwanese banks fell 18 percent in the first quarter of this year.
More broadly, Taiwanese companies cut new investments in China by 14 percent last year from a year earlier. Investments to Southeast Asia, on the other hand, have grown to nearly half of Taiwan’s total foreign investments, according to a report from the Ministry of Economic Affairs.
Cathay Financial reported a drop in first-quarter profits due to increased foreign currency hedging costs and lower investment gains, according to a company presentation. Profitability in the banking arm, however, rose 33 percent to NT$9.2 billion (US$293.1 million) compared with the same period last year.
Most of Cathay’s business in Southeast Asia is focused on corporate banking, according to Miao. For its business clients, the bank provides services such as financial registrations, local government engagement and legal consultation.
Other banks are also trying to take advantage of capital flows between China and Southeast Asia. Singapore’s second-largest lender, Oversea-Chinese Banking Corp (華僑銀行), recently released a target to boost revenue from business between Greater China and Southeast Asia.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday obtained the government’s approval to inject an additional US$7.5 billion into its US subsidiary, the Department of Investment Review said in a statement. The department approved TSMC’s application of investing in TSMC Arizona Corp, which is engaged in the manufacturing, sales, testing and design of IC and other semiconductor devices, it said. The latest capital injection follows a US$5 billion investment for TSMC Arizona approved in June. The chipmaker has broken ground on two advanced fabs in Arizona with aggregated investments approved by the department totaling US$24 billion thus far. According to TSMC, the first Arizona
The lethal hack of Hezbollah’s Asian-branded pagers and walkie-talkies has sparked an intense search for the devices’ path, revealing a murky market for older technologies where buyers might have few assurances about what they are getting. While supply chains and distribution channels for higher-margin and newer products are tightly managed, that is not the case for older electronics from Asia where counterfeiting, surplus inventories and complex contract manufacturing deals can sometimes make it impossible to identify the source of a product, analysts and consultants say. The response from the companies at the center of the booby-trapped gadgets that killed 37
FRIENDLY TAKEOVER: While Qualcomm Inc’s proposal to buy some or all of Intel raises the prospect of other competitors, Broadcom Inc is staying on the sidelines Qualcomm Inc has approached Intel Corp to discuss a potential acquisition of the struggling chipmaker, people with knowledge of the matter said, raising the prospect of one of the biggest-ever merger and acquisition deals. California-based Qualcomm proposed a friendly takeover for Intel in recent days, said the sources, who asked not to be identified discussing confidential information. The proposal is for all of the chipmaker, although Qualcomm has not ruled out buying some parts of Intel and selling off others. It is uncertain whether the initial approach would lead to an agreement and any deal is likely to come under close antitrust scrutiny
SECURITY CONCERNS: The proposed ban on Chinese autonomous vehicle software and hardware would go into effect with the 2027 and 2030 model years respectively The US Department of Commerce today is expected to propose prohibiting Chinese software and hardware in connected and autonomous vehicles on US roads due to national security concerns, two sources said. US President Joe Biden’s administration has raised concerns about the collection of data by Chinese companies on US drivers and infrastructure as well as the potential foreign manipulation of vehicles connected to the Internet and navigation systems. The proposed regulation would ban the import and sale of vehicles from China with key communications or automated driving system software or hardware, said the two sources, who declined to be identified because the