Taiwanese banks are set to target mainland China's small- and medium-sized enterprises (SMEs) by offering yuan denominated bank guarantees at competitive rates.

According to local media, the guarantees will be less expensive than alternatives on offer, including commonly used letters of credit (L/Cs).

Four banks

A report in the Economic Daily News says that four of Taiwan's state-funded banks will apply for permission to provide Chinese SMEs with bank guarantees under the economic cooperation framework agreement signed by Taiwan and China earlier this year.

The banks set to provide the service are First Bank, Taiwan Cooperative Bank, Land Bank and Chang Hwa Bank.

Competive rates

The banks will charge guarantee fees in yuan rather than US dollars. According to the newspaper report, this would provide better margins for the banks as well as providing Chinese SMEs with competitively priced finance facilities.

The report says the bank guarantees would be more competitive than corporate loans or US dollar-dominated L/Cs.

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