The US has replaced China as the nation’s largest debtor, as domestic banks increased their stakes in US debt last quarter from three months earlier, the central bank said yesterday.
The shift fell in with global fund movements amid earlier expectations of interest rate hikes by the US Federal Reserve and capital outflows from China.
As of December last year, the local banking industry had international claims of US$64.76 billion to the US, followed by China with US$49.21 billion, according to a quarterly country risk report issued by the central bank.
The banking sector’s international claims amounted to US$344.6 billion at the end of last year, up 1.72 percent from the preceding quarter, the report showed.
The increase came because local banks built up positions in foreign debts issued by governments and private lenders, the central bank said.
The low interest rates in Taiwan’s home market had driven local funds abroad to seek higher yields in foreign assets, especially in yuan-related investments, thereby raising concerns over rapidly growing exposure to China.
The worry subsided much last quarter as evidenced by the international claim statistics that aim to measure banks’ country risk.
With the latest data, exposure to China retreated as it became the nation’s second-largest debtor after the US, following five quarters running as its largest debtor, thanks to regulatory requirements and yuan volatility.
However, China ranked first on an ultimate risk basis, which calculates a nation’s consolidated debts after risk transfers.
According to the central bank’s statistics, Taiwanese banks’ lending to China totaled US$64.98 billion at the end of December, compared with US$70.12 billion at the end of September, but higher than the US$61.08 billion extended to the US, the report found.
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