US replaces China as Taiwan’s largest debtor

NOT BY MUCH:The banking sector exposure to the US on an ultimate risk basis was US$59.55 billion at the end of June, compared with US$59.22 billion for China

Staff writer, with CNA

The US has replaced China as Taiwan’s largest debtor on the back of Taiwanese banks’ efforts to tighten control on lending to China in a bid to lower possible risks down the road, the central bank said.

The exposure of Taiwan’s banking sector to the US on an ultimate risk basis, which calculates a nation’s consolidated debts after risk transfers, stood at US$59.55 billion as of the end of June, surpassing the US$59.22 billion in outstanding international claims by Taiwanese banks to China.

Taiwanese lending to China fell US$2.9 billion from a quarter earlier on an ultimate risk basis, while exposure to China on a direct risk basis fell US$3.7 billion to US$39.53 billion over the period.

It was the seventh consecutive quarter that Taiwan’s exposure to China on both an ultimate risk and direct risk basis fell, as the Financial Supervisory Commission (FSC) has asked banks to tighten their risk control on loans to China since China’s economic growth has showed signs of moderating.

The People’s Bank of China has also repeatedly lowered its key interest rates to boost the Chinese economy, which has lowered the amount of yuan deposits and undermined interest of the local banking sector in lending to Chinese enterprises.

Japan is the third-largest debtor to Taiwan on an ultimate risk basis, after local banks extended US$33.50 billion in loans to Japan as of the end of June.

The fourth and fifth-biggest debtors were Luxembourg, with US$32.46 billion in exposure, and Hong Kong with US$20.15 billion, while the UK was sixth with US$11.94 billion, followed by Australia (US$10.67 billion), the Cayman Islands (US$9.16 billion), the British West Indies (US$7.66 billion) and Singapore (US$6.40 billion).

International claims by the Taiwanese banking sector on an ultimate risk basis rose US$613 million, or 0.18 percent, from a quarter earlier to US$334.6 billion, and the sector’s exposure on a direct risk basis stood at US$360.6 billion, up US$4.97 billion, or 1.4 percent, to US$360.6 billion, the central bank said.