The development history and current situation of financial institutions in Taiwan give us a good frame of reference. Behind the financial industry is not only industry, but also politics, and it is also a mirror projection and reflection of changes in the entire social structure and needs.
Author | Bao Yunan, a practitioner of risk consulting services in a world-renowned foreign consulting company
Editor-in-chief | Yin Xiaolin
The financial industry and the real world rely on each other. There are many carp in fresh water, and yellow croakers in the East China Sea;
Due to the different stages and characteristics of economic growth, mainland China has experienced successive developments from large state-owned banks, joint-stock banks to local commercial banks, and the business direction has blossomed from corporate to interbank to retail business, etc. ; There have been the golden years of non-standard assets, and trusts have taken advantage of the opportunity to rise; there are also capital markets curved development, but brokers are constantly innovating and iterating; In the post-industrial era, the concept of Generation Z has changed, mobile payment tools have become more convenient, and the wave of consumption has led to a surge in demand for consumer finance.
Different social structures, policy and regulatory environments, industrial foundations, and economic growth stages bring different financial needs and the representation and foundation of financial institutions. The same is true for the development of the financial industry and financial institutions in Taiwan, China.
Changes due to the situation and elimination and renewal
Taiwan’s social and industrial development can roughly be divided into three stages. The first stage is the economic take-off period under the authoritarian era. At that time, the ethnic groups had not yet been torn apart, the society was in a period of development opportunities, and the involution phenomenon was not serious; the industry was dominated by agriculture and light industry, and under the guidance of policies, an export-oriented foreign trade processing industrial park was established to attract foreign investment For example, the world's first export processing trade industrial park "Kaohsiung Processing Export Zone" was born in Taiwan in 1966, and was later copied and imitated by the mainland.
During this period, the listed companies born in Taiwan included the textile and garment giant Ruhong, the shoe OEM giant Baocheng , and the food processing giant Uni-President. Correspondingly, during the same period, Taiwan's financial industry was in the initial stage and a period of strict financial control, relatively elementary, financial institutions were dominated by the banking system, and state-owned financial institutionsoccupied the core competitive position. The
system developed until 1980, and its biggest feature is the "dual financial system" - the coexistence of an organized financial system and an unorganized private financial market ( shadow banking ) .
Taiwan’s GDP growth rate trend Data source: wind
The second stage is the ten construction period under the leadership of Chiang Ching-kuo in the late 1970s. ethnic groups began to tear apart; industrial policy leadership still occupies an important position, and evolved to focus on the development of heavy chemical industry. The listed companies that appeared during this period were mainly Formosa Plastics Group , Formosa Chemicals, and Sinosteel and other heavy chemicals industrial group.
At the same time, the financial industry was in a stage of change and innovation. In 1989, the " Bank Law " was revised, and Taiwan allowed interest rate to be liberalized, and banks were opened to private operation. With this as a sign, the financial industry has entered a period of opening up and liberalization, private capital has entered, a large number of emerging private financial institutions have emerged, and they have innovated business models one after another, bringing service and efficiency improvements. At the same time, excessive competition in the banking industry has also appeared during this period, resulting The problem of industry-wide losses.
The third stage is the period of transformation and upgrading of industrial structure. platformTaiwan's industrial transformation began to bear fruit in the 1990s. During this period, the electronics industry, which was intentionally fostered by the policy, has developed rapidly, replacing the traditional export-oriented low-end manufacturing industry, and gradually becoming Taiwan's "core assets". Taiwan's position in the global industrial chain . As a result, Taiwanese businessmen have also accumulated huge wealth, forming the basis for the prosperity of the people of Taiwan.
Benefiting from the success of industrial transformation, after entering the 21st century, Taiwan's economy has maintained a medium-to-low growth rate for nearly 20 years, enabling Taiwan to enter the ranks of wealthy regions. But at the same time, the low-speed economic growth and the lack of new industrial growth points that can spread from point to point lead to the unshakable solidification and tearing of Taiwan's class under the stock market structure. The low salary and high unemployment rate of young people have become normal.
During this period, the main listed companies in Taiwan successively included foundry giants Quanta , Compal , Inventec, ASUS , etc.; once smash hits HTC, TSMC (chip foundry) , MediaTek (chip design) , ASE (package and test) , Hon Hai , Largan (lens) , etc. At this stage, Taiwan's financial industry has entered a stable period of financial demand, emerging and new financial demand has declined, and product and mechanism innovations in the financial market have decreased significantly; the system, products, and systems of the capital market have become more and more perfect, and the proportion of foreign capital in the stock market is relatively high. High and has extremely strong market pricing power and influence, the proportion of retail investors continues to decline; at the same time, the market volatility and turnover rate are not high, and it is the after-tax per share that affects the total market value of listed companies more Profit (EPS) , not valuation (P/E) .
The competitive landscape of financial institutions has also tended to be stable. 16 major financial holding groups have been established one after another, and differentiated features among financial institutions have gradually emerged. China Development Financial Holdings; Cathay Pacific Gold , Fubon Financial featuring life insurance; Yushan Gold featuring wealth management, etc. Financial institutions no longer have counterattack opportunities, and the window of opportunity is closed.
台湾主要金融事件节点
拔地而起的16大金控集团
两岸的金融业和金融机构攀附经济增长而变化，形成不同的结构特色、竞争格局和商业模式。 However, the industrial logic of the financial industry is evolving along almost the same path: from bank-led to market-led; the scale of the financial system continues to expand, financial functions continue to strengthen, emerging products and models continue to emerge, and the coupling between businesses is also increasing. Credit inflation and liquidity are enhanced, and the competition pattern among financial institutions is becoming more and more stable.
Nowadays, Taiwan’s financial system is relatively complete, matching its economic volume and industrial structure. The characteristics of its financial system are as follows: The bank credit market mainly serves small and medium-sized enterprises, and the multi-level capital market serves For thousands of listed companies, lack of equity primary market, weak local asset management institutions, developed financial derivatives markets such as stock index futures and options but no commodity futures market, and an overdeveloped insurance market.
Scale of major financial markets in Taiwan (trillion NT dollars)
Specifically at the level of financial institutions, in 2001, Taiwan’s “Financial Control Law” was promulgated, establishing the foundation for mixed financial operations. Now Taiwan's 16 major financial holding groups occupy the vast majority of the market share of the financial system. Most of the financial holding groups have private backgrounds, and emerging financial institutions are very rare.
Although Taiwan's financial holding groups span multiple industries, in order to avoid excessive dispersion of resources and homogeneous competition, they all maintain their own core main industries. Among the 16 major financial holding groups, banks are at the coreThere are 9 companies, 3 companies with life insurance securities as their core enterprises, Yuanta Financial Holdings with securities industry as their core, and Development Financial Holdings featuring direct investment.
Taiwan’s main financial holding group, under the rule of the financial oligarchy, the dragon-slaying teenager becomes a dragon?
Once the financial system is formed, the financial institutions in it will have a strong reflexive effect, reacting on the overall social environment and economic system, and the two are mutually external.
Cathay Financial Holdings and Fubon Financial Holdings, the largest financial holding group in Taiwan, are from the same origin (Chua’s family) , competed from Taiwan’s fierce competition environment, overtook the state-owned financial system in a corner and institutions, which emerged as the largest financial holding group in Taiwan after the 1990s. However, the former "Dragon Slaying Boy" also unknowingly reacted to the financial system, and could become a "dragon" if he was not careful. If the piranhas are released, the pond will be full of disasters.
Cathay Pacific Financial Holdings and Fubon Financial Holdings started with insurance business. With their huge financial license resources, cross-selling network, and the power to shake up financial supervision, they have established an absolute leading position in Taiwan's financial system. Taiwan even exempted commercial life insurance premiums from taxes in 2005.
In the financial holding group's system, various financial sub-sectors are often required to cooperate with each other from the assessment mechanism, so the bank wealth management department under the financial holding group consciously guides the public to purchase insurance policies. At the same time, because the financial holding group has monopolized the channel, it has also boosted the development of investment-type insurance, resulting in a substitution effect, which has affected the launch of asset management products by asset management institutions. The asset allocation of life insurance and annuity insurance in the household sector in Taiwan rose from 8.32% in 2004 to 17.64% in 2016. In the past 12 years, life insurance has grown steadily and linearly, but the proportion of securities investment has continued to year-on-year decrease.
Taiwan’s insurance industry took advantage of the oligopoly, business model and synergistic effects of the Financial Holding Group, and it is extremely brilliant. The penetration of the insurance industry once ranked first in the world, reaching 21.31% in 2018, far exceeding the world average of 6.13%.
Blessings and misfortunes, the frantic development of the insurance industry without supervision, and the unrestrained sales of insurance policies have made Taiwan's insurance companies a behemoth that devours funds.
In the last century, Taiwan’s economy maintained medium-to-high speed growth, the market financing demand was active, and the interest rate center was relatively high. At that time, Taiwan’s insurance companies sold too many policies with high interest rates. Before 2002, it was still around 5%. However, after life insurance companies absorbed a large amount of funds with an interest rate above 5%, the current government bonds return rate of investment in Taiwan is only 2% to 3%, forming a The so-called " interest rate spread loss ", the old life insurance companies that have been established for a long time are of course the most serious problem, because they have a lot of old insurance policies with high interest rates.
Underwriting costs are abnormally high, investment difficulties on the asset side are forced to increase the proportion of overseas investment , net capital is insufficient, Taiwan’s life insurance industry has been playing this game from 2008 to today, as long as there are new low-cost policies The massive stream keeps coming in and the game may never stop.
After 2002, in order to solve the "loss of interest rate spread", Taiwan's life insurance companies further crazily attracted money, and the asset size increased from 0.81 trillion yuan to 6.35 trillion yuan, which is equivalent to an expansion of 6.85 times. South Korea's insurance market is about the same size as Taiwan, but the solvency and capital adequacy of Taiwanese insurance companies are far inferior to South Korea's. At the end of 2018, the net value ratio of the insurance industry in mainland China was 9.1%, in Japan it was 6%-7%, in the United States it was 9%-10%, in South Korea it was 8%, and in Taiwan it was only 4.25%.
The ratio of assets of the insurance industry in Taiwan to the total assets of financial institutions
The biggest "Achilles heel" of Taiwan's financial industry is that the financial holding group with life insurance as its core business is too large. Under the stable market competition pattern, the lack of anti-monopoly mechanism, the profit-seeking strategic orientation of financial institutions is too strong, and they already have the absolute right to speak in the subdivided fields. This has led to the penetration of the insurance industry in Taiwan. The per capita protection amount of the insurance policy is far lower than that of the United States, Japan, South Korea and other countries; The capacity of suitable domestic investment assets is limited, resulting in the overseas investment of Taiwan's insurance industry funds accounting for the world's largest proportion. Behind this may mean that the entire financial system in Taiwan is facing huge overseas investment risks and exchange risks.
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