Taiwanese Banks Increase US Exposure, China Becomes Second Largest Debtor

Taiwanese banks have significantly increased their financial exposure to the United States, reaching approximately USD 194.87 billion by the end of June 2023. This figure represents a rise of USD 14.80 billion, or 8.22 percent, compared to the previous quarter. This information was released by the Central Bank of Taiwan and highlighted by Hsieh Jen-chun, the deputy head of the bank’s Department of Financial Inspection, during a recent press briefing.

In addition to increasing deposits and interbank loans in the US market, Taiwanese banks have also expanded their investments in stock and bond mutual funds. The data indicates a strategic move by these banks to capitalize on favorable market conditions in the US.

China Emerges as a Key Debtor

At the same time, China has ascended to become the second largest debtor nation for Taiwanese banks, with exposure climbing to USD 48.50 billion at the end of June. This marks an increase of USD 2.38 billion, or 5.16 percent, from the previous quarter. Hsieh explained that this growth in exposure is largely due to banks taking advantage of a stronger Chinese yuan, which has facilitated investments in the Chinese bond market, along with an increase in interbank loans extended to Chinese institutions.

The widening gap in exposure between the US and China has reached a historic peak, with a difference of USD 146.4 billion as of June 30, 2023. This disparity highlights the divergent financial paths taken by Taiwanese banks in their international dealings.

Overall International Claims Growth

Overall, Taiwanese banks have seen a substantial increase in international claims, which rose by 5.57 percent from the previous quarter to reach USD 648.2 billion. This increase is primarily attributed to enhanced lending to nonbank firms, indicating a robust demand for credit in various sectors.

Following the US and China, Luxembourg ranks third in terms of debtor nations, with Taiwanese banks holding USD 48.06 billion, reflecting a 4.20 percent increase from the prior quarter. Other significant debtor nations include Australia at USD 40.22 billion and Japan at USD 37.26 billion.

The top ten debtor regions collectively account for USD 478.0 billion, representing 73.75 percent of the total international claims held by Taiwan’s banks as of June 30, 2023. Other notable countries in this list include Hong Kong (USD 32.29 billion), the United Kingdom (USD 22.11 billion), Singapore (USD 19.02 billion), France (USD 18.86 billion), Vietnam (USD 16.84 billion), and South Korea (USD 16.29 billion).

These developments underscore the shifting dynamics in the financial landscape for Taiwanese banks as they navigate increasing opportunities and risks in both the US and Chinese markets.