Lending to China by banks operating in Taiwan hit a record high in the first three quarters of the year amid warming business ties across the Taiwan Strait, the central bank said on Saturday.
On an ultimate risk basis, outstanding international claims of Taiwan’s banks, including their offshore banking units, to China totaled US$51.01 billion (NT$1.5 trillion) as of the end of the third quarter, according to data compiled by the central bank.
As a result, China became Taiwan’s largest debtor, the central bank said.
The central bank said that with several major Chinese banks, such as Bank of China (中國銀行) and Bank of Communications (交通銀行), setting up branches in Taiwan, Taiwanese banks have put their funds into these Chinese counterparts as deposits.
After the government lifted a ban for domestic banking units of Taiwanese banks to conduct yuan-denominated transactions in early February, cross-strait financial exchanges have been on the rise, market analysts said.
The central bank said that although the expansion of exposure to China indicated closer business across the Taiwan Strait, the data also showed the risks that Taiwan banks have been over concentrated in China.
Also on an ultimate risk basis, Luxembourg ranked as the second largest debtor to Taiwan with outstanding international claims totaling about US$40.64 billion, the central bank said.
The large exposure to Luxembourg showed investors in Taiwan favored the European country as a mutual fund investment destination since it is a tax free havengement companies to operate there, the central bank said.
The US came in third as Taiwanese banks’ exposure on an ultimate risks basis totaled US$40.10 billion, ahead of Hong Kong with US$18.82 billion in loans, the UK with US$7.53 billion, and Australia with US$7.10 billion.
The Cayman Islands was the seventh largest debtor of Taiwan’s banks with US$7.01 billion in exposure, followed by India with US$5.73 billion, the West Indies UK with US$5.65 billion and Singapore with US$4.02 billion.
In addition to Luxembourg, the West Indies UK, the Cayman Islands, the UK and Singapore are known as tax-free havens so they attracted a large number of Taiwanese investors, the central bank said.
The central bank said that of the total outstanding international claims by Taiwanese banks, 69.37 percent of the loans carried a maturity of one year or shorter as of the end of September, compared with 69.07 percent at the end of June.