Three mainland state banks want to set up offices in Taiwan but bankers say legal difficulties will block their way. China Merchants Bank, Bank of China and Industrial and Commercial Bank of China (ICBC) had applied to the central bank, the People's Bank of China (PBOC), for permission to establish representative offices on the island, the Beijing Youth Daily said yesterday. The banks declined to comment. He Jianxiong, deputy chief of the international department of the PBOC, said it was considering the application and hoped the Taiwan side would give it positive consideration. He said banks on either side of the strait could not set up branches on the other, leading to a shortage of financial channels, which had hampered the flow of information and financing of Taiwan firms on the mainland. The inability of Taiwan banks to have mainland branches meant they were missing out on a large and rapidly growing market, he said. The setting up of representative offices on both sides of the strait was the unbending policy of the PBOC, he said. He said that under rules the PBOC was drafting Taiwan banks would be allowed to buy shares in China's commercial banks. The most aggressive of the three is the Industrial and Commercial Bank, whose president Jiang Jianqing last year went to Taiwan and met representatives of more than 20 banks. In July this year, his bank set up co-operative relations with more than 20 Taiwan banks to allow for direct payments. A company ICBC controls in Hong Kong, ICB Asia, is preparing to set up a branch in Taiwan. For its part, the PBOC has approved representative offices on the mainland for four Taiwan banks - Hua Nan Commercial, Taiwan Co-operative, Chang Hua Commercial and United World Chinese Commercial. An official of the Taiwan Finance Ministry said it had received no applications from mainland banks. If it had, it would have dealt with them in accordance with relevant rules, she said. But bankers said any movement on the mainland bank applications needed a legal revision to the Statute Governing Relations between the Taiwan Area and the Mainland Area, which restricts investment by mainland firms. The economic arguments are strong. According to China's customs figures, Taiwan was the mainland's fifth-largest trading partner last year, with bilateral trade of US$32.3 billion, after Japan, the United States, the SAR and South Korea.