Taiwan banking industry loans to mainland China dropped by 16% in September from a year earlier amid slower economic growth there and rising military tension between the two sides, according to new Taiwan government figures on Friday.
Including loans for businesses, investment and interbank use, exposure declined by NT$234 billion, or $7.5 billion, from a year earlier to about NT$1.19 trillion as of the end of September, the Financial Supervisory Commission said, according to the Central News Agency.
That NT$1.19 trillion accounted for 28.9% of the industry’s net worth, the lowest ratio since the government commission started collecting data nine years ago, CNA said. The ratio stood at 30.2% at the end of May, CNA reported.
Beijing claims sovereignty over Taiwan, a self-ruled democracy of 24 million that is the world’s 22nd largest economy and home to many global technology companies including semiconductor maker Taiwan Semiconductor Manufacturing, or TSMC, and other Apple suppliers such as Hon Hai Precision, Pegatron and Lite-On Technology.
China’s People’s Liberation Army carried out high-profile military exercises around the island following a visit by U.S. House of Representatives Speaker Nancy Pelosi in August. Taiwan is one of the largest investors in the mainland, with approximately $200 billion of projects approved by Taipei authorities since 1991, according to Taiwan government figures.
“I do not think there is any imminent attempt on the part of China to invade Taiwan,” President Joe Biden said a press conference earlier this month after a three and a half hour meeting with China President Xi Jinping ahead of a G20 gathering in Indonesia. China shares were mixed last week on hopes of eased strains between the country and its Western trading partners following the G20 gathering.
The drop in Taiwan bank lending is among other signs of weakening cross-Strait bonds. Interest among Taiwan companies in reducing their exposure to the mainland was borne out in a mid-year survey by the U.S.-based Center for Strategic and International Studies. Some 76% of 525 Taiwan companies agreed with the statement: “Taiwan needs to reduce its economic dependence on mainland China,” while only 21% percent disagreed. (See post here.)
More than a quarter of the Taiwan firms with business in mainland had already moved some of their production or sourcing, and another third were considering doing so, CSIS found. Only 31% said they had no plans to move at all.
The financial sector accounted for two of the top three families to make the Forbes Taiwan Rich List this year. Cathay Financial Holding Chairman Tsai Hong-tu and his brother Cheng-ta ranked No. 2 with a fortune worth $10.5 billion; Richard and Daniel Tsai, whose fortune mainly comes from Fubon Financial Holding, came in at No. 3 with a fortune worth $9.6 billion.
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