US$250 billion gov't credit guarantee to help firms raise funds: Experts

Taipei, Jan. 17 (CNA) The US$250 billion credit guarantee Taiwan's government has agreed in a tariff deal with the United States is expected to help enterprises raise funds to facilitate their investments in the U.S., according to experts.

Cathay United Bank chief economist Lin Chi-chao (林啟超) told CNA big companies such as chipmaking giant Taiwan Semiconductor Manufacturing Co. (TSMC), which has previously pledged US$165 billion investments in the U.S., may not need any credit guarantee.

However, smaller-sized companies may need such government support to boost banks' willingness to extend loans, Lin said.

On Friday, the Cabinet announced Taipei and Washington have reached an agreement to lower tariffs on Taiwanese goods entering the U.S. from 20 percent to 15 percent, without stacking them on existing most-favored-nation (MFN) rates.

As part of the deal, Taiwanese semiconductor, electronics manufacturing service (EMS), AI, and energy companies will invest US$250 billion directly in the U.S.

Taiwan's government, meanwhile, has pledged to provide up to US$250 billion in credit guarantees to financial institutions to support U.S.-bound investments by companies in the semiconductor and information and communication technology (ICT) sectors.

Echoing Lin's views, Fubon Financial Holding Co.'s chief economist Lo Wei (羅瑋) said through a credit guarantee mechanism, it is possible that smaller companies will enjoy lower borrowing costs, making it easier for TSMC and other Taiwanese tech firms, including server makers, to build overseas industrial clusters.

Lo said he thought the credit guarantee the government has pledged is feasible, noting that Taiwan already operates similar mechanisms to support domestic small and medium-sized enterprises.

To illustrate how the system works, Lin offered an example.

If a company borrows from a bank and the government agrees to guarantee 70 percent of the loan, Lin said, the government would cover that portion if the borrower defaults, while the bank would absorb the remaining 30 percent.

On Friday, Cabinet spokesperson Michelle Lee (李慧芝) said on social media that the credit guarantee aims to help enterprises extend their reach globally and does not mean the government will throw the money around.