In the years ahead, demographic changes in the Asian population in Los Angeles will pose new challenges to Chinese and Korean community banks that have built their business on serving their own ethnic communities.

The success of those banks thus far has stemmed from the presence of large communities of Chinese and Korean immigrants who feel more comfortable banking with someone who speaks their native language and relates to their culture.

But second-generation Chinese and Korean Americans are likely to be more fully integrated into mainstream America, both economically and culturally, and are just as likely to take their business to Bank of America or Wells Fargo Bank as they are to Cathay Bank or Hanmi Bank.

Moreover, fewer Korean immigrants are coming to Los Angeles these days than in the past, and Chinese immigrants are no longer predominantly from Taiwan, the homeland of many founders of local Chinese-American community banks, but instead hail from mainland China.

Indeed, the demographics are changing rapidly among both ethnic groups. In 1987, close to 10,000 Korean immigrants came to California, according to the state Department of Finance. But by 1998 that number had dropped to 4,465.

Korean immigration dropped off sharply after the L.A. riots, when many small Korean firms were looted and burned.

"After the riots of 1992, there has been a sharp drop-off in immigration from Korea," said Cooke Sunoo, director of the Asian/Pacific Islander Small Business Program. "It never got back to the level of the '70s and '80s, and there has even been substantial out-migration."

But the riots have not been the only factor that has made L.A. a less attractive destination for Korean immigrants. Many Koreans came to the U.S. in order for their children to have access to higher education, which was difficult to get in Korea in the '70s and '80s but which has now become more widely available there.

Improving economy

In addition, the Korean economy has improved considerably in the past 10 to 15 years, even though it was hit hard by the Asian financial crisis of 1997. That upturn has made it less imperative for Koreans to seek a better life in California.

"That is one reason we are doing a lot more business with other ethnic minorities now than we have in the past," said Yong Choe, chief financial and chief operating officer of Hanmi Bank.

When Hanmi opened 19 years ago, 100 percent of the bank's customers were Korean, according to Choe. These days, that is changing fast, as 30 percent of Hanmi's business is now with non-Koreans.

Even though the number of Korean immigrants to Los Angeles has decreased in recent years, the overall Asian population in L.A. County is still expected to grow at a fairly moderate pace. As of July 1998, there were 1.2 million Asian/Pacific Islanders living in L.A. County, making up about 13 percent of the total population, according to the Department of Finance.

The department estimates that number will increase at an annual rate of between 0.9 and 1.9 percent for the next 20 years. But other populations will grow only slightly slower, the department estimates, so Asian/Pacific Islanders will make up a little over 14 percent of the total local population by 2020.

That's a significantly slower increase than that of the 1970s and 1980s, when the Asian population grew rapidly and went from 3.3 percent of the total L.A. County population in 1970 to 10.3 percent in 1990.

At the same time, the majority of Asian immigrants arriving in California is expected to come from mainland China, rather than from Taiwan and Hong Kong. And it's not clear to what extent these immigrants will rely on the established Chinese-American banks, which are often Taiwanese in origin.

"Many of the mainland Chinese immigrants are very driven," said one local expert on the Far East who asked not to be identified. "They are very individualistic. They pick up English fast, and they are quick to adapt and to interact with mainstream Americans."

Heading for the suburbs

As the profile of Asian immigrants is slowly changing, a growing number of more-established and second-generation Chinese and Korean Americans are moving out of the traditional immigrant neighborhoods and into the suburbs.

"The communities are becoming more diffused," said Derek Derman, banking analyst with Wedbush Morgan Securities. "As a result, the banks on the retail side are strategically opening up branches in other Chinese communities."

Like Hanmi Bank, Chinese-American banks are also reaching out to underserved ethnic minorities outside their own communities in order to be less dependent on one single group.

These may be Latino, Central American, or other Asian minorities, such as Vietnamese or Filipino, who are also arriving in large numbers in L.A. County and who often live in close proximity to the Chinese and Korean communities.

"We want to use our product, not our ethnicity, as our niche," said Li-Pei Wu, chairman and chief executive of General Bank. "We use our expertise in international finance to expand into other market segments, particularly other immigrant groups."

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