Taiwan financial firms' exposure to China down 12% at end-2023

Taipei, Feb. 3 (CNA) The exposure of the local financial sector to China fell almost 12 percent from a year earlier at the end of 2023 amid concerns over the slowing Chinese economy, according to the Financial Supervisory Commission (FSC).

Data compiled by the FSC, the top financial regulator in Taiwan, showed the exposure of Taiwan's banking, insurance and securities industries to China fell to NT$1.05 trillion (US$33.65 billion) as of the end of 2023, down 11.96 percent from a year earlier.

As for Taiwanese banks, their exposure to China fell below the NT$1 trillion-mark to NT$961.0 billion at the end of 2023, down 10.66 percent from a year earlier. That exposure accounted for 22.7 percent of the industry's net worth, the lowest level in the 42 quarters since the FSC started tallying such exposure to China in the third quarter of 2013, the data indicated.

Lin Chih-Chi (林志吉), deputy director-general of the FSC's Banking Bureau, said the local banking industry's exposure to China, including lending, investments and interbank loans and deposits, moved lower as worries over China's economic outlook prompted Taiwanese banks to scale back their funding to the Chinese market.

While China's gross domestic product (GDP) grew 5.2 percent in 2023, meeting the "around 5 percent" growth target set by the Chinese government, the pace remains uncertain as the country faces multiple headwinds in particular in the fragile property sector.

The International Monetary Fund forecast on Friday that China's economic growth will slow to 4.6 percent in 2024 and further moderate in the medium term with growth of about 3.5 percent estimated for 2028.

Many Taiwanese financial firms have turned cautious about the spiraling financial crisis in the property market in China, where debt-ridden property giant China Evergrande Group has been ordered to liquidate by a court, Lin said.

In 2023, Taiwanese banks' lending to investments in China totaled NT$244.44 billion, down 7.51 percent from a year earlier, and lending to China also fell 14.53 percent from a year earlier to NT$640.28 billion.

Bucking the downturn, the local banking industry's interbank loans to Chinese counterparts and bank deposits rose 22.42 percent from a year earlier to NT$76.29 billion.

The banking industry's exposure to China remains controllable despite the slowing Chinese economy, the second largest in the world, Lin said.

In the local insurance industry, FSC data showed, investments in marketable securities in China fell 25.29 percent from a year earlier to NT$77.4 billion at the end of 2023, accounting for only 0.24 percent of the insurance industry's total disposable funds.

The investments in Chinese securities were all made by Taiwanese insurers, while non-life insurance companies owned zero securities in China, the FSC said.

The local securities and futures industry cut their exposure to China by 10.28 percent to NT$12.94 billion at the end of 2023, it added.

Taiwanese securities firms saw their exposure to China fall 12.91 percent from a year earlier to NT$9.998 billion at the end of 2023, while the exposure of futures and investment trust firms totaled NT$251 million and NT$2.69 billion, respectively, at the end of 2023, little changed from a year earlier, according to the FSC.

The FSC said the decline in exposure among securities firms largely reflects financial investment strategy adjustments.