The Impact of Deregulating OBU’s Renminbi’s Business on the Financing Behavior of Taiwanese Businessmen in China
Yi Chun Kuo, Associate professor of Chung Yuan Christian University, Taiwan
ABSTRACT
August 2011, Taiwan Financial Supervisory Commission (FSC) announced that banks in Taiwan can serve the Renmibi’s (RMB) business on offshore banking unit (OBU). After that, Taiwanese businessmen can engage in RMB-related businesses through OBU in Taiwan to get access to RMB financing to enhance the flexibility in capital utilization. The foreign direct investment (FDI) and international trade of Taiwanese businessmen in China are important parts of Taiwan’s economy, which create huge amount of cash flow between the Mainland China and Taiwan. Due to the financial crisis in 2008, the fluctuation of exchange rate caused serious problems to import and export enterprises. RMB is relatively stable than other currencies and being preferred by Taiwanese businesses for their financial risk controlling. This study survey the policy impact of the deregulation and aims to find out whether the OBU business opening would affect Taiwanese businessmen in terms of their financing behaviors, and whether the opening of OBU business is beneficial to most Taiwanese businessmen or only on some Taiwanese businessmen. Keywords: Financial behavior, Offshore banking unit (OBU), Renminibi (RMB), Taiwanese businessmen in China, Cross-border trade settlement, Cross-border RMB Business
INTRODUCTION
China has been implementing the reform and opening up policies since 1978. With the economic development and rise of China, China has become the world’s second largest economy by 2010. According to the Chinese customs statistics, China’s exports in January 1992 amounted to 3,991 million USD and increased to 113,653.43 million USD in 2009. In the respect of import, China’s total imports amounted to 3,016 million USD in January 1992 and increased to 94,560 million USD in 2009 (General Administration of Customs, 2009). China’s total exports increased by more than 28 times and the total imports increased by more than 31 times in 17 years. With China’s growing volume of foreign trade, the benefits derived from RMB cross-border trade become increasingly important to China. RMB cross-border trade has also become a hot topic. In December 2003, the people’s bank of China (PBC) and Southeast Asia countries (Indonesia, Laos, Vietnam) signed bilateral Currency Swap Agreement. On July 1, 2009, an announcement of promulgating the Administrative Rules on the Pilot Program for RMB Settlement of Cross-border Trade Transactions was released. On April 8, 2009, the State Council decided to conduct pilot RMB settlement of cross-border trade transactions in Shanghai, Guangzhou, Shenzhen, Zhuha, Dongguan, Hong Kong, Macau and the ASEAN member countries. In 2010, China and Association of Southeast Asian Nations (ASEAN) signed Free Trade Area (FTA). After that, China signed bilateral Currency Swap Agreement with many countries, i.e. the Republic of Korea, Hong Kong, Malaysia, Belarus, Indonesia, and Argentina. China tried to increase the scale and usage of RMB and steadily promote the pilot RMB settlement of cross-border trade transactions to enhance facilitation of trade and investment.
The Journal of Global Business Management Volume 9 * Number 1 * February 2013 71 In 2008, improper operation of subprime mortgages and derivatives caused global financial turmoil. The credit of the U. S. and Europe has been hit hard in the financial crisis, causing currency instability consequently. On the other hand, although China’s economy has been affected by international economic impact, China has not suffered as serious as the U. S. and European countries. In the past, international trade was mostly settled in international currencies i.e. USD, Euro, Japanese Yen and Deutsche Mark. Due to relatively stricter official control, RMB has been more stable than other international currencies in this financial turmoil. Hence, other countries, in particular, the China’s neighboring countries are increasingly willing to use RMB for settlement. Coupled with China’s official intent on RMB internationalization and China’s active expansion of RMB-related businesses, the internationalization of RMB gradually becomes a hot topic for discussion. The trade relations between Taiwan and China have become increasingly closer in past 30 years (Liou, 2010). In July 2011, Taiwan’s imports from China accounted for 28% of the total and Taiwan’s exports to China accounted for 16% of the total (MOF, 2011). As the data indicate, import and export percentages have increased significantly over time. China has become the largest destination of foreign investment of Taiwanese businessmen. With more frequent cross-Strait business activities, the needs of RMB businesses of Taiwanese businessmen in Mainland China have gradually become an issue of concern (Lin and Yi, 2006; Fuller, 2008). In the past, Taiwan and Mainland China were opposite due to political background. The governments across the Strait had restrictions on cross-Strait financing. If a Taiwanese businessman wants to do business in Mainland China, the businessman may set up in a third location foreign company and establish OBU account in the name of the foreign company in Taiwan, by which funds can be transferred and used. In the past, according to Taiwan’s law, the OBU established in Taiwan cannot provide deposit, exchange, credit of RMB, having many restrictions on RMB-related businesses. Although Taiwanese businessmen had financial channels in China, the implementation would be very difficult. As a result, Taiwanese businessmen had quite limited financing channels in Mainland China (Huang et al., 2009). After amending the law and ongoing consultations of the two governments, on August 30, 2011, Taiwan Financial Supervisory Commission (FSC) approved Taiwan’s banking industry to run RMB business. The opening of RMB business can reduce the procedure and cost of currency exchange for trading to make the use of funds more flexible. Taiwanese businessmen can engage in RMB-related businesses through offshore banking business (OBU) in Taiwan to get access to RMB financing to enhance the flexibility in capital utilization. Based on the above background, this study aims to find out whether the OBU business opening would affect Taiwanese businessmen in terms of their financing behaviors. Whether the opening of OBU business is beneficial to most Taiwanese businessmen or has impact on some Taiwanese businessmen only.
THE DEVELOPMENT OF RENMINBI
For historical and political background, Renminbi (RMB) had been controlled stricter than Western currencies. In 1987, Chinese government changed political strategy and started economic reform. After that, China released the deregulation of RMB step by step. In 2008, due to financial crisis, the currencies of U.S. dollar and Euro became unstable. During the period of financial crisis, the recession of Chinese economics is not as serious as Western countries. RMB value is more stable than other international currencies at that time. China started releasing the restriction of RMB premeditated to increase the liquidity and acceptance of RMB in order to urge RMB as a settlement, investment and reserve currency before realizing the goal of making RMB becoming the International currency.
72 The Journal of Global Business Management Volume 9 * Number 1* February 2013 To increase the using scale of RMB in international trading, Chinese government is speeding up the pace to promote the usage of RMB by signing RMB settlement of cross-border trade transactions or agreements with other countries. After entering the world trade organization (WTO) in 2001, China deregulated the restriction of RMB step by step. In November, 2002, China and Association of Southeast Asian Nations (ASEAN) signed Framework on Economic Cooperation. To reached the goal of the” Internationalization” of RMB, the PBC declared in its Announcement No.26 that foreign financial institutions would be allowed to do RMB business in Guangzhou, Zhuhai, Qingdao, Nanjing and Wuhan since December 1, 2002. On January 14, 2007, the PBC (No. 3) released an announcement to allow domestic financial institutions to issue RMB financial bonds in Hong Kong, and further expanded the RMB business in Hong Kong. In 2008, because of the financial crisis, the issue of RMB’s internationalization aroused discussion (Zhang, 2009; Wu et al., 2010; Chen and Cheung, 2011). On December 12, 2008, the PBC and the Bank of Korea agreed to establish a Swap Arrangement to help improve short-term liquidity conditions in the financial systems of China and Korea and to promote the bilateral trade. This new facility supported the provision of liquidity in amounts of up to 180 billion RMB/ 38 trillion KRW. The effective period of the facility will be three years and could be extended by agreement between the two sides. In 2009, the PBC signed bilateral domestic currency swap agreements with six economies (the Republic of Korea, Hong Kong, Malaysia, Belarus, Indonesia, and Argentina) to support bilateral trade and investment with a total value of 650 billion Yuan. Not only developed bilateral currency swap agreement with other regions, China also cooperates with European area in the aspect of trades, investments and economics aggressively. On January 1, 2010, China and Association of Southeast Asian Nations (ASEAN) signed Free Trade Area (FTA). The establishment of China-ASEAN FTA helped the development of RMB Trade Settlement. To promote cross-border trade and investment, the PBC signed 153.5 billion Yuan worth of domestic currency swap agreements with monetary authorities in Iceland and Singapore in 2010. As the end of 2010, the overall scale of currency swap agreements reached 803.5 billion Yuan. These agreements and operations have played a role in promoting the use of RMB in cross-border trade settlement and investment. Cross-border trade transactions settled in RMB in regions where the pilot program was launched grew notably in 2010 (Sung, 2011). Overseas RMB settlement was concentrated in Hong Kong and Singapore, which together accounted for 88 percent of the total RMB payment and receipt business. On March 24, 2010, The PBC and the National Bank of the Republic of Belarus Signed an Agreement on Trade Settlement in Local Currencies. This agreement is the first time that China signed an agreement of local currency settlement for transactions in general trade with a non-neighboring country and is a major step forward after the launch of the pilot program of RMB settlement of cross-border trade transactions. It represents a new step forward in promoting regional financial cooperation after implementation of the pilot program for RMB settlement of cross-border trade transactions. Under the Agreement, bilateral trade transactions can be settled in any currency, including Chinese Yuan and Belarusian ruble. On 13 July 2010, The Bank of China (Hong Kong) was authorized to provide RMB Clearing Services for Taiwan Region. The arrangement will further facilitate people-to-people exchanges across the Strait, and lay a solid foundation for the future establishment of currency clearing mechanism. In 2011, to enhance the liquidity of RMB for internationalization, China continued the development of the pilot program of RMB settlement of cross-border trade transactions and further facilitates outbound investments. April 2011, the PBC and the New Zealand Reserve Bank signed in Beijing a bilateral local currency swap agreement in the amount of 25 billion Yuan for the purpose of strengthening financial
The Journal of Global Business Management Volume 9 * Number 1 * February 2013 73 cooperation and promoting bilateral trade and investment. On April 19, the PBC and the Central Bank of the Republic of Uzbekistan signed in Beijing a bilateral local currency swap agreement in the amount of 700 million Yuan for the purpose of strengthening financial cooperation and promoting bilateral trade and investment. On May 6, the PBC and the Central Bank of Mongolia signed in Ulan Bator a bilateral local currency swap agreement in the amount of 5 billion Yuan for the purpose of promoting bilateral trade and providing short-term liquidity in the financial system. On June 13, the PBC signed with the National Bank of Kazakhstan a bilateral local currency swap agreement with an amount of 7 billion Yuan. The currency swap would expire in three years, but could be extended with mutual consent. On June 23, the PBC signed a new bilateral local currency settlement agreement in Russia with the Central Bank of the Russian Federation. With the signing of the agreement, bilateral local currency settlement will cover not only border trade but also general trade. The stable currency value of the RMB is a key factor in the willingness of overseas entities to hold and use RMB for trade settlements. The launch of RMB settlement of cross-border trade transactions help enterprises manage foreign exchange rate risks and reduce foreign exchange losses, which can promote economic and trade development between China and its neighboring countries or regions. The pilot program provides a source for overseas RMB supplies. It strengthens economic and trade ties between China and its neighboring countries and regions. Now, the PBC continued pushing ahead the reform of RMB exchange rate formation mechanism by strengthening the flexibility or RMB exchange rate. With the RMB Trade Settlement, the scale of the currency circulation in the surrounding areas will be further enlarged. RMB receipts will also be maintained in the traded areas and start to undertake the functions of a regional currency.
TAIWANESE BUSINESSMEN IN CHINA
Offshore Banking Unit McCarthy (1979) defines offshore banking centers as “cities, areas, or countries which have made a conscious effort to attract offshore banking business by allowing relatively free entry and by adopting a flexible attitude where taxes, levies, and regulations are concerned.” In 1968, Singapore set Asia Currency Unit to attract foreign currencies from nonresidents in Singapore. It is the earliest offshore banking unit in Asian. Supported by Singapore’s government, OBU developed well and fast in Singapore. Singapore became one of main financial areas in the world. The main trade targets of OBU are nonresidents and foreign currencies. In accordance with laws and regulations of both Taiwan and Mainland China, many Taiwanese enterprises in China set offshore company in duty-free areas, and apply OBU accounts in Taiwan to proceed financial or trade operations (Wei, 1997). By operating with OBU and offshore companies, Taiwanese enterprises in China can save tax, promote profits and operate finance more flexibly. Although the restrictions of OBU are less than other accounts in Taiwan, cross-Strait financial or trading regulations were still restricted strictly. Taiwanese businessmen are eager for loosening regulations. In response to the financial requests of Taiwanese businessmen, Taiwanese government deregulated OBU’s RMB business on August 30 2011. It is expected that the deregulation of OBU’s RMB business can increase the financial assistance to Taiwanese businessmen.
74 The Journal of Global Business Management Volume 9 * Number 1* February 2013 The Finance Barrier China started the economic reform since 1978, and has been vigorously expanding domestic infrastructure ever since then. Being vast and rich in resources and labor supply, and coupled with similar cultural background without language barrier, many Taiwanese enterprises are attracted to invest in China. At early times, because of technological shortage in Mainland China, Taiwanese businessmen were mainly from labor-intensive industries (Lee, 2010). In recent years, China’s economy has been growing rapidly, and the great consumption potential and domestic market have become one of the important factors that attract Taiwanese enterprise to do business in Mainland China. According to the statistics of the Investment Commission, Ministry of Economic Affairs (MOEA), the FDI in Mainland China approved during the period from 1991 to July 2011 amounted to 10.641billion USD. With increasingly closer cross-Strait business ties and more and more Taiwanese businessmen coming to invest in Mainland China, the capital control and investment restriction of Taiwan and Mainland China are still considerably restrict due to historical background and political factors. Subject to political fluctuations, financing difficulty and other factors, Taiwan’s financial institutions are unable to come to Mainland China as the financing channels of the Taiwanese businessmen. Financing has become the biggest barrier to the sustainable development of small and medium Taiwanese businesses. In addition, it has been pointed out (Wang, 2004) that different financing purposes will affect the financing operations of Taiwanese businessmen. Wu (2006) indicated it is easier for Taiwan-based enterprises in China to obtain short-term operational capitals via OBU of financial institutions in Taiwan. The different needs of financing will cause different financing modes. Wang (2004) indicates if the operating form of Taiwanese businessmen in China is a joint venture, they could finance from banks in China via Chinese cooperator’s resources. If the operating form of Taiwanese businessmen in China is invested by Taiwanese businessmen themselves, they may face financing problems and may finance from parent companies in Taiwan. Lee’s study (Lee, 2005) indicates that the capital establishment and revolving funds of Taiwanese enterprises in China usually offered by parent companies in Taiwan. The rate of financing from Chinese financial institutions increased. Thus, we develop the following hypothesis: H1: The deregulation of Taiwan OBU’s RMB business will have a significant influence on Taiwanese businessman’s willingness for financing by OBU in Taiwan on different financing purpose
Finance Resource Funds are cores of an enterprise to maintain the operation of an enterprise. Due to the policy limitations of Taiwan and Mainland China, Taiwanese businessmen have quite limited financing channels in Mainland China and face a shortage of funding sources. The financing sources of Taiwanese businessmen doing business in Mainland China can be roughly divided into three areas, financing from Taiwanese banks, financing from the Chinese banks and financing from foreign banks (Lee, 2005). Because the lack of understanding Taiwanese businessmen by the Chinese banks and foreign banks, Taiwanese businessmen can hardly get bank financing services in Mainland China. According to research, the main capital resources for Taiwanese enterprises in China were offered from Taiwan (Lee, 2005）. The ratio of financing from Chinese banks is low (Yang et al., 1988). Although the ratio of Taiwanese businessmen doing business with Chinese banks gradually increased over the years, Taiwanese businessmen still face barriers to get financing from the mainland banking system due to complex financial regulations, loan procedures and poor relations with local banks. Na and Lightfoot (2006) found that enterprises invested in China earlier were easier to finance from Chinese banks and face fewer financing barriers than those invested in China latter. Different financing modes of enterprises will also affect the financing decisions (Lightfoot, 2006). As it is pointed out in study (Yang and Tu, 2004),
The Journal of Global Business Management Volume 9 * Number 1 * February 2013 75 regardless of investment scale, Taiwanese businessmen in Mainland China prefer to financing from Taiwanese international financial business branches to keep profits and avoid risks. Dawu (2001) point out that SMEs have more difficulties in cross-Strait financing. The financing of Taiwanese SMEs can be divided into financing from Taiwanese banks, foreign banks and Chinese banks, or Chinese security pledge companies (Wang, 2004）. Regarding financing from Taiwanese banks, the company may apply for import and export financing in the name of the parent company in Taiwan. In the name of the parent company or individual, the company may apply to domestic banks for letter of credit (L/C) to support its subsidiaries in Mainland. However, this is restricted by legal and financing qualifications, financing cap, and the procedures are very complex and expensive. The implementation of such measures will increase the operational cost and risks of the parent company. Regarding financing from Chinese banks, although Chinese banks have been changing from conservative to active in terms of loaning to Taiwanese businesses, the Chinese banking industry tends to loan to big Taiwanese companies. Smaller Taiwanese companies may have difficulty in getting funds due to credit problems (Sun et al., 2002). Listing on Chinese stock market is also hard to implement due to firm size or regulations. Moreover, in the respect of financing from foreign banks, there will be problems of high costs and difficulty in getting loans. Hence, most Taiwanese SMEs depend on the capital injection of parent companies in Taiwan or scheduling of mainland branch companies or subsidiaries in third country for financial scheduling to get funds (Chen, 2010). Thus, we develop the following hypothesis: H2: The deregulation of Taiwan OBU’s RMB business will have a significant influence on Taiwanese businessman’s willingness for financing by OBU in Taiwan on different business forms.
EMPIRICAL STUDY AND RESULTS
A questionnaire is designed to survey the Taiwanese businessmen investing in coastal area of Mainland China including the Haixi Economic Zone, the Pearl River Delta, the Yangtze River Delta and the Bohai Coastal Region, and mainly focus on the manufacturing industry. As Taiwanese government’s publications have pointed out, the coastal area is the major region of Taiwanese investment in China and the manufacturing is the major industry of Taiwanese investment in China. The questionnaire designed is divided into two parts. The first part is basic questions including firm size, years of establishment in China, trading type, purpose of financing and so on. The second part is to survey the willingness. This section is measured by Likert scale with scores ranging from 1 (strongly disagree) to 5 (strongly agree) representing the level of willingness. The following regression model is established as below:
Y1X0 +
Y1: the willingness of Taiwanese businessmen to finance from OBU’s RMB business in Taiwan
X0: financing purposes of Taiwanese businessmen
As the independent variable X0 of Eq. (1) is a dummy variable, this study converts X0 into four variables of
X1, X2, X3, X4, and develops new regression equation as below:
Y1X1X2X3X4+
X1: the main financing purpose is daily revolving funds.
X2: the main financing purpose is capital expenditure.
X3: the main financing purpose for trading financing.
X4: having no financing loans
76 The Journal of Global Business Management Volume 9 * Number 1* February 2013 Y1Z1Z2Z3
Z1: investment time of Taiwanese businessmen in China
Z2: Investment amount of Taiwanese businessmen in China
Z3: Trading form of Taiwanese businessmen in China The questionnaire was first mailed to 320 Taiwanese enterprises in China in October, 2011. Follow-up telephone calls were made to approximately 70 companies. Deducting twelve invalid responses, 134 usable responses were obtained, yielding a total response rate of 134/320=41.88%.
Table 1: Profile of the respondents (n=134) ITEM Percentage 1.The establish time Before 1987 8.93% During 1987-2000 46.43% During 2001-2008 30.36% After 2008 14.29%
2. The mainly invest position (multiple-check) Yangtze River Delta 34.38% Pearl River Delta 50% Bohai Coastal Region 7.81% Haixi Economic Zone 7.81%
3. The invest amount (USD) Under 500 thousand 8.93% 500 - 1,000 thousand 12.5% 1,000 - 20,000 thousand 7.14% 2,000 - 3,000 thousand 21.43% 3,000 - 4,000 thousand 7.14% 4,000 - 5,000 thousand 10.71% 5,000 thousand - a hundred million 10.71% Above a hundred million 21.44%
4. The invest mode Sole proprietorship 76.79% Sino-foreign joint venture 16.07% Sino-foreign cooperative 7.14%
5. Major trading patterns Triangular trade model 51.79% Order receive and export in the same area 37.5% Import for domestic sale 7.14% Other 3.57%
6. The major fund’s demand Long term financing 19.64% Short term liquidity 42.86% Trade financing 35.71% Multiple-check 1.76%
7. Major financing purposes of the company are Daily revolving funds 17.86% Capital expenditure 41.07%
The Journal of Global Business Management Volume 9 * Number 1 * February 2013 77 Trade financing 28.57% Having no loans 1.79% multiple-check 10.71%
8. Before the OBU was allowed to do RMB-related business, the hedge
against the appreciation of RMB are (multiple-check) No such hedges 32.2% Non-deliverable forward foreign exchange 5.08% Foreign exchange options 15.25% Borrow weak currencies in the currency market (e.g. : USD at present) to convert into strong currencies (e.g. : RMB at present), and repay the loans after collecting 13.56% the receivables for goods Directly priced in RMB 33.9%
9. Major forms of retained earnings Deposit in a third place 26.79% Keep in China 35.71% Remit to Taiwan 37.5%
10. The main way of corporate finance Company's own funds 42.86% Issuance of corporate bonds 3.9% Bank borrowings and financing 23.38% Parent company or individual shareholders funded 15.58% Others 14.30%
This study finds that most Taiwanese businessmen in China started from 1987 and the investment concentrated during the period from 1987 to 2000, accounting for 46.43%. The investment of Taiwanese businessmen mainly concentrates on the Yangtze Delta and the Pearl River Delta. The ratio of investment in the Pearl River Delta is relatively higher accounting for 50%. Taiwanese businessmen in China mainly operate in the manufacturing industry, accounting for 62.5%. In the non-manufacturing sector, most of the companies are trading companies. The main investment type of Taiwanese businessmen in China is the company of sole proprietorship. Most Taiwanese companies are non-public companies. In case of publicly listed companies, they are listed in Taiwan. The overseas branches of the companies are mainly established in Virgin Islands or Hong Kong. Most Taiwanese companies set up parent companies in Taiwan and branches in the Mainland China. The parent companies in Taiwan are mainly operating headquarters or for design, development and financial fund-raising. The branches in mainland China are mainly centers of production, manufacturing and quality control. Regarding marketing and purchasing, the differences across the Straits are not significant in terms of industrial percentage. The respondents show that Taiwanese business in China is mainly of manufacturing. The functions of research and development, financial operations and other businesses are conducted mainly by companies in Taiwan. The major trading pattern of Taiwanese businessmen is triangular trade model. In the respect of raw material purchase, except some raw materials are purchased abroad, most of the raw materials are purchased domestically. Regarding sales, with expanding domestic market of China, the mainland market has become one of the major sales regions of Taiwanese businessmen. The data shows that most Taiwanese businessmen in Mainland China receive order and sell in the same area. The cases of domestic purchase and foreign sales or foreign purchase and domestic sales are relatively fewer. The main ways of corporate finance are Company's own funds and Bank financing, accounting for 42.86% and 23.38% respectively. The financing from banks is mainly conducted with Taiwanese banks.
78 The Journal of Global Business Management Volume 9 * Number 1* February 2013 It is suggested that Taiwanese banks are still one of the major financing channels of Taiwanese businessmen in China. It means as the financing channels of Taiwanese businessmen have not been completely established in China or Chinese banks do not understand the Taiwanese enterprise very well, it is still hard for Taiwanese enterprises to finance from Chinese banks. The results of Table 2 show when doing business in China, in case of different financing purposes, Taiwanese businessmen will have different willingness to finance via OBU in Taiwan after the approval by the Financial Supervisory Commission of OBU to implement RMB-related financial businesses. The results find if the financing purpose of the Taiwanese businessmen is capital expenditure or trade financing, it has a significant positive relationships on the willingness to finance via OBU in Taiwan.
Table 2: The relationship of financing purpose and willingness to finance from Taiwan OBU’s RMB business after the deregulation. Independent Variable Coefficient t value p value Constant 3.167 11.221 0.000 X1 0.533 1.494 0.141 X2 0.833 2.630 0.011* X3 1.146 3.463 .001** X4 -0.167 -.223 0.824 *p<0.05, **P<0.01
From table 3 we can find, after the deregulation of providing RMB-related services to OBU by the Financial Supervisory Commission, the willingness to use OBU’s RMB business for financing will significantly affected by different investment time and trading patterns of Taiwanese businessmen in China. Taiwanese businessmen who invest in China more lately of smaller scale and complex trading pattern will have stronger willingness to finance via OBU. Table 3: The relationship of firm’s type and willingness to finance from Taiwan OBU’s RMB business after the deregulation Independent Variable Coefficient t value p value Constant 3.887 9.005 0.000 Z1 .347 3.132 0.003** Z2 -.044 -1.074 0.288 Z3 -.376 -3.000 0.004** *p<0.05, **P<0.01
CONCLUSION
This study finds that different financing purposes of Taiwanese businessmen doing business in China will result in different level of willingness to finance from OBU in Taiwan after the Financial Supervisory Commission’s deregulation of RMB-related financial business implemented by OBU. The loan time and financing operation may possibly be the major factors leading to the differences in willingness to finance from OBU in Taiwan. In addition, different investment time and trading patterns of Taiwanese businessmen in China will significantly affect the willingness to use OBU for financing. The earlier Taiwanese businessmen in China are more likely to develop connections and financing channels in China and have better understanding of the financing-related information in China. Therefore, the time of establishment of Taiwanese businessmen in China will affect the willingness to finance from OBU in Taiwan. Moreover, different trading patterns will have different needs in the face of currency conversion.
The Journal of Global Business Management Volume 9 * Number 1 * February 2013 79 Enterprises involved in more complex trading patterns are more likely to face exchange rate risk and exchange cost. Therefore, trading behaviors of different levels will possibly affect the willingness of Taiwanese businessmen to finance from OBU. However, Taiwanese businesses of different investment sizes have no significant differences in terms of willingness to use OBU financing. This indicates that the deregulation can help improve the OBU financing willingness of Taiwanese businessmen of all sizes. Regarding the understanding of Taiwanese businessmen on the deregulation of the Financial Supervisory Commission with respect to the implementation of RMB-related business of OBU, 19.64% of Taiwanese businessmen in China have completely no idea about related information. This indicates that most Taiwanese businessmen do not fully understand the provisions of the new regulation, relevant business and information, and do not know how to use OBU RMB-related services. It thus can be learnt that the government needs to do considerable amount of work in advocating relevant information to popularize the business practices and more efficiently promote the publicity of the regulations to help Taiwanese businessmen in China. The questionnaire survey results indicate that very few Taiwanese businessmen in China have negative opinions of the implementation by OBU RMB-related financial services. Almost all of them agree that the deregulation will help their future development. The causes of negative opinions include the belief and concern that uncertain factors will affect the stability of implementation after the deregulation. In addition, some believed that the deregulation was just out of short-term political considerations. When the economic gap across the Straits increasingly narrow in the future, the negotiation room for Taiwan and China will be increasingly smaller, which may even threats the business niche of Taiwanese businessmen in China. However, most Taiwanese businessmen are positive about the deregulation, believing that it helps financing, business operation, competition and financial operation of Taiwanese enterprises in Chin. In the background of stable political relations and more frequent economic exchange across the Straits, the two governments are expected to have more consensuses and economic development as well as more deregulations to help Taiwanese businessmen in China for better development. Due to unique cross-Strait political background, in early times, both governments were doubted about the opening of financial businesses. The first batch of foreign bank branches entered the Chinese financial market in April 2007 for the great piece of pie. Compared with other foreign banks, due to regulatory limitations, Taiwanese financial institutions have lagged behind in entry into China for development. As a result, they are threatened by foreign and Chinese financial sectors in terms of further development. Due to the cultural and language advantages, if the governments can loosen relevant restrictions, the development potentials of Taiwanese banks in China will be greater. The penetration of Taiwanese banks in China can help Taiwanese banks as well as Taiwanese businessmen in China. Hence, the acceleration of the development of Taiwanese banks in China has become what the Taiwanese banks and enterprise expect the governments across the Straits can loosen. When the governments are lifting relevant regulations, they should learn whether the deregulation can help Taiwanese businessmen as a whole or only some of them to achieve the greatest effect with limited resources in the background of different needs. Prior to deregulation, the government should in-depth understand whether the needs and expectations of various types of Taiwanese businessmen and Taiwanese businessmen as a whole are consistent, and make proper adjustments of relevant regulations to maximize the policy effectiveness. In this way, the good intentions of the government will not fall short.
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