(Bloomberg) -- One of Taiwan’s largest financial groups downplayed risks from the cross-strait relationship with China and said a surge in the local tech stocks driven by demand for artificial intelligence is sustainable.

Lee Chang-ken, president of Cathay Financial Holding Co., said in a June 26 interview in London that leadership on both sides are “wise enough” to work out how to “deal with a lot of difficult issues” and the relationship with China isn’t likely to deteriorate too much despite recent tensions.

The island last week raised its travel warning for China to the second-highest level, citing Beijing’s decision to expand laws that threaten “separatists” from the island with the death penalty. Taiwan President Lai Ching-te, who took office on May 20, has said he’s open to talks with Beijing, but the self-governing democracy is already a de facto state. China claims the island as its territory.

Lee, whose company communicates with regulators on both sides of the strait, said there have been no negative repercussions on Cathay Financial yet. The Taipei-based firm, which operates insurance, banking and brokerages companies, had more than 130 staff in China and Hong Kong at the end of 2022.

Discussing the new Chinese law in the legislature on Wednesday, Peng Jin-lung, the chairman of Taiwan’s Financial Supervisory Commission, said it’s also concerned about the matter and will hold discussions.

Lee also defended the lofty valuation of Taiwan’s chip companies, including Taiwan Semiconductor Manufacturing Co., citing strong AI demand.

“You don’t feel this is a real bubble, because they really create the value, they really create profit,” Lee said. It’s possible the tech sector could face a setback if profit and value-generation doesn’t keep up, but otherwise “definitely this can sustain a little bit longer.”

Even as TSMC approaches $1 trillion in value, 97% of analysts recommend buying the stock, according to data compiled by Bloomberg, and Bloomberg Intelligence expects the firm to outpace peers in the coming chip-making cycle.

Economy ‘OK’

On Taiwan’s economy, Lee said he doesn’t see the need for the central bank to cut its 2% benchmark interest rate as the economy is “OK” and the rate remains relatively low internationally.

Cathay Financial is meanwhile working to become a net zero emission company by 2050. The firm’s subsidiary, Cathay United Bank, has a dedicated project finance team, including 10 staff who focus on renewable energy and infrastructure projects.

The company’s total investment scale to sustainability themed investing is around NT$1.5 trillion ($46.2 billion), including NT$331 billion in low-carbon investment. This includes NT$63 billion specifically directed at renewable energy.

Lee’s bonus is also tied to reaching net zero, with 12 targets related to sustainability and ESG issues which increase every year, he said.

(Updates with comment in fifth paragraph)

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