With rising default risks from Country Garden Holdings Co to China’s leading asset management firm, Zhongzhi Enterprise Group Co, concerns are growing that a slump in the Chinese property market could trigger a wider financial crisis, creating a potential spillover effect that would impact the broader economy. Analysts worry that it would lead to a “Lehman moment” for China if Beijing stops short of interventions to stem any domino effects its financial system might experience.
The term “Lehman moment” refers to a situation in which the problems of one company or one seemingly minor component of an economy turn out to be so large that they become everyone’s problem, just like the bankruptcy of Lehman Brothers Holdings Inc in September 2008, which triggered a broader market rout for US stocks before developing into the global financial crisis of 2008 and 2009.
It remains unknown if a Lehman moment would take shape in China, but what is already certain is that the ongoing downturn in China’s property sector can be expected to persist for a while, and the systemic risks from rising defaults might hurt its economic growth further. Against this backdrop, the People’s Bank of China unexpectedly cut its key interest rates on Tuesday, two months after its previous cut, but there is an increasing consensus that the Chinese central bank might need to cut rates further and extend its monetary easing to ensure ample liquidity in its financial system.
The fast-rising economic risks in China might come as a surprise for some, but given the latest developments related to its property developers and investment trust firms, Taiwan’s financial institutions’ efforts to reduce their exposure to China over the past few years have been reasonable and correct. While the three major financial industries in Taiwan — banking, insurance, and securities and futures — reported aggregate exposure of NT$1.12 trillion (US$35.06 billion) to China as of the end of June, the risks are controllable, the Financial Supervisory Commission (FSC) said on Tuesday.
Taiwanese financial firms have slashed their exposure to the world’s second-largest economy quickly and sizably. The FSC’s data found that Taiwan’s financial holding companies’ aggregate exposure to China dropped to a historic low of 8.62 percent of their combined overseas investments at the end of June, while Taiwanese banks’ Chinese market exposure — including corporate lending, investments and interbank loans — also fell to NT$1.01 trillion as of June, or 23.91 percent of their combined net worth, both the lowest levels on record.
The result should come as no surprise to anyone. Financial institutions in Taiwan and around the world are often under special supervision and strict regulation, because their activities and services would directly influence economic performance and consumer rights. They are highly sensitive to risks and naturally adjust their overseas investments or credit profiles when they see fit.
Bad news has repeatedly broken out in China’s real-estate industry in recent years with the risk of a snowballing economic downturn. A broader sense of nervousness had already emerged among investors as early as in the second half of last year, creating no reason for Taiwanese banks to increase investments or loans in China. Instead, if there was a chance for them to reduce investment holdings or tighten credit lines, they would not hesitate to do so.
However, more actions are still needed if Taiwanese financial firms aim to promptly respond to any major financial events in China. To tackle headwinds, firms must review and adjust their holdings of Chinese securities and bolster risk management after extending loans to the Chinese market.
In the US’ National Security Strategy (NSS) report released last month, US President Donald Trump offered his interpretation of the Monroe Doctrine. The “Trump Corollary,” presented on page 15, is a distinctly aggressive rebranding of the more than 200-year-old foreign policy position. Beyond reasserting the sovereignty of the western hemisphere against foreign intervention, the document centers on energy and strategic assets, and attempts to redraw the map of the geopolitical landscape more broadly. It is clear that Trump no longer sees the western hemisphere as a peaceful backyard, but rather as the frontier of a new Cold War. In particular,
When it became clear that the world was entering a new era with a radical change in the US’ global stance in US President Donald Trump’s second term, many in Taiwan were concerned about what this meant for the nation’s defense against China. Instability and disruption are dangerous. Chaos introduces unknowns. There was a sense that the Chinese Nationalist Party (KMT) might have a point with its tendency not to trust the US. The world order is certainly changing, but concerns about the implications for Taiwan of this disruption left many blind to how the same forces might also weaken
As the new year dawns, Taiwan faces a range of external uncertainties that could impact the safety and prosperity of its people and reverberate in its politics. Here are a few key questions that could spill over into Taiwan in the year ahead. WILL THE AI BUBBLE POP? The global AI boom supported Taiwan’s significant economic expansion in 2025. Taiwan’s economy grew over 7 percent and set records for exports, imports, and trade surplus. There is a brewing debate among investors about whether the AI boom will carry forward into 2026. Skeptics warn that AI-led global equity markets are overvalued and overleveraged
As the Chinese People’s Liberation Army (PLA) races toward its 2027 modernization goals, most analysts fixate on ship counts, missile ranges and artificial intelligence. Those metrics matter — but they obscure a deeper vulnerability. The true future of the PLA, and by extension Taiwan’s security, might hinge less on hardware than on whether the Chinese Communist Party (CCP) can preserve ideological loyalty inside its own armed forces. Iran’s 1979 revolution demonstrated how even a technologically advanced military can collapse when the social environment surrounding it shifts. That lesson has renewed relevance as fresh unrest shakes Iran today — and it should
RSS