Taiwanese banks’ fast disappearance from loan deals with Chinese companies is the latest indication of a collective effort to cut exposure to the world’s second-largest economy as the Chinese housing crisis rages on and geopolitical tensions linger.
The participation rate of Taiwanese lenders, defined by their involvement in any syndicated or club loan to Chinese company borrowers, has dropped to a record low of 1.7 percent this year, according to a Bloomberg-compiled data series dating back to 2010. The rate peaked at nearly 33 percent in 2013, before falling to 4 percent last year.
The slump reflects a broader move by Taiwan’s financial institutions, including industry leader Fubon Financial Holding Co (富邦金控), to reduce taking risks in an ailing Chinese economy, a process expedited by the COVID-19 pandemic and China’s ongoing property woes.
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The retreat coincides with the run-up to the Taiwan presidential election in January, which is set to be one the most fractured races ever and might reshape the region’s geopolitical landscape.
Several Hong Kong-based loan bankers at Taiwanese lenders told Bloomberg that participating in China deals would be challenging due to stricter credit approval and instructions from headquarters to reduce risks.
Many lenders have turned to markets such as Australia and Southeast Asia to look for business, said the bankers, who have asked not to be identified.
“Geopolitical risk is definitely on the radar after the US-China trade war, but slower economic growth, higher credit risks and more intense competition are also the reasons behind the pullout from the market,” Natixis SA senior economist Gary Ng (吳卓殷) said.
However, the retreat of Taiwanese banks might not have a major impact on China’s offshore credit market as borrowers have alternative sources of funding, according to Ng.
China still commands the largest share of syndicated loans in the Asia-Pacific excluding Japan so far this year, with companies from the country having received US$126 billion of financing, down from US$152 billion in the same period last year, Bloomberg data show.
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