For Fubon, Taiwan's second-largest publicly listed financial group, a gamble on the boom time in China is worth taking, even though it comes laden with political risks.

Financial services are sensitive areas for regulators anywhere in the world, but perhaps nowhere more so than in the relationship between China and Taiwan, which only now are slowly emerging from six decades of cold war.

"We have to be careful. But on the other hand, it's a huge potential," said Fubon Financial Group's president Victor Kung in an interview with AFP.

"People who heeded the risk too much and therefore decided not to go to China -- they must be regretting it now."

The company moved with lightning speed after the China-friendly Ma Ying-jeou was elected president of Taiwan in 2008, heralding a period of detente across the narrow straits separating the island from the mainland.

As early as December 2008, Fubon acquired a 20 percent stake in Xiamen City Commercial Bank, a lender located in Fujian province in the mainland's southeast, home to billions of dollars of Taiwanese investment.

"Fujian province is a very good area for Taiwanese financial institutions to really focus on, mainly because the ancestors of most Taiwanese came from that province," said Kung.

"We speak the same dialect. The food is very much the same. Culture-wise, we're closest to Fujian province. Taiwanese people feel very comfortable in Xiamen and other parts of Fujian."

Fubon is part of a broader trend of bolder Taiwanese companies putting their money in the mainland. In 2010, the island's enterprises invested $13.3 billion in China, up nearly 120 percent from a year earlier.

In November last year, Fubon opened up a fully owned property and casualty insurance firm, also in Xiamen. Then in July this year, it set up an asset management company in Beijing with a local partner.

It has also sent an application to Chinese regulators for a life insurance venture with the Nanjing city government in eastern China, meaning securities is now the only financial industry it has still to enter on the mainland.

At the moment, Fubon's revenues from China are "negligible", according to Kung, but the ambition is that it could make up a much larger share in 10-20 years.

The plan is not just to cater to Taiwan investors on the mainland -- "the low-hanging fruit", according to Kung -- but also to start servicing Chinese clients in a major way.

That all depends on whether Taiwan and China can expand on commitments made in the Economic Cooperation Framework Agreement, or ECFA, which they signed in mid-2010.

The pact has opened the way to lowering of tariffs and broadened access to each other's markets, and sets the stage for further negotiations on reducing barriers in areas such as finance.

"We'd like to see ECFA moving faster, but like anything cross-strait, the beginning is always more difficult," Kung said.

High on Fubon's wishlist is permission to increase the stake in the Xiamen bank from the current 20 percent.

That is the maximum allowed for single foreign investors in Chinese banks, and what Fubon is really aiming for is "semi-national" treatment on a par with local competitors, said Kung.

Fubon's activities in China are "daring", but so far it has not made a wrong move, according to Mars Hsu, a Taipei-based analyst for Grand Cathay Securities.

"It's true Fubon has been very aggressive, but as of now, its major investments seem to be on the right track," he said.

While Fubon has been busily mopping up opportunities in China, cross-straits ties can shift markedly, and any change in the political temperature could quickly impact the company.

"It takes political negotiations of regulators of the two sides to agree on how to supervise the other side's operations," said Kung.

And whenever politics becomes part of the equation, everything becomes more complicated. Although Taiwan has ruled itself since 1949, China still considers the island part of its territory awaiting reunification, by force if necessary.

Relations were particularly sticky in the period between 2000 and 2008, when the island was ruled by President Chen Shui-bian from the Democratic Progressive Party, or DPP.

The DPP wants Taiwan to move towards formal independence from China -- at direct odds with Beijing, which aims for reunification.

The DPP is contesting elections in January next year raising the prospect of a change in the diplomatic tide if its candidate Tsai Ing-wen wins. But Kung is sanguine.

"If there should be a change of regime, at least initially there will be a shock, and that shock will maybe slow things down a little bit," he said.

"But at the end of the day, I think this closer cross-strait relationship is an irreversible trend. I don't think either side wants to see a return to hostilities. It's just impossible to imagine."

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