Taiwanese financial institutions’ aggregate exposure to China fell 13.44 percent year-on-year at the end of February as firms adopted a prudent and conservative strategy regarding investment in the world’s second-largest economy, data released by the Financial Supervisory Commission (FSC) on Thursday last week showed.
Financial institutions include banks, insurance companies, securities and futures brokerages, and investment trusts. Their exposure refers to lending, investments, interbank loans and deposits, according to the commission’s definition, with the larger the exposure, the higher the risk involved.
The financial firms’ combined exposure to China was NT$781.255 billion (US$24.44 billion) at the end of February, down NT$121.32 billion from NT$902.575 billion a year earlier, the data showed.
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The ratio of their exposure to China over their combined net worth fell to 14.7 percent, from 18 percent a year earlier, the data showed.
The banking sector underwent the largest drop in exposure to China, as Taiwanese banks cut their combined lending, investments and interbank loans by NT$180.146 billion, or 13 percent, to NT$723.675 billion from a year earlier, Banking Bureau Deputy Director-General Chang Chia-kui (張嘉魁) said.
That was mainly because China’s economy has slowed in the past few years, along with the rising risks associated with local government debt and the real-estate market, which made Taiwanese banks more cautious about their operations there, Chang said.
While the sector’s exposure to China has steadily declined from 2018, when the US-China trade dispute started to emerge, it also reflected Taiwanese banks’ global deployment strategy and supply chain realignment, FSC Chairman Peng Jin-lung (彭金隆) told lawmakers in January.
The insurance sector’s exposure to China fell NT$8.9 billion, or 15 percent, from a year earlier to NT$49.8 billion at the end of February, the commission’s data showed.
The decline was due to rising risks related to China’s political and economic situation as well as geopolitical developments, the commission said.
Meanwhile, the combined exposure to China among Taiwanese securities and futures brokerages, as well as investment trusts and consulting firms, fell NT$4.27 billion, or 35.46 percent annually, to NT$7.78 billion at the end of February, the data showed.
The decline primarily came from securities brokerages, while futures brokerages and investment trusts saw no significant changes in their China exposures, the commission said.
It underscored securities brokerages’ shrinking financial portfolios in China over concerns about tariff impacts, credit spread changes and interest rate fluctuations, it said.
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