The US remained Taiwan’s largest debtor last quarter as domestic banks increased stakes in US dollar-based assets to a record high, attracted by their high interest rates, the central bank said on Thursday.
As of June, the local banking industry reported international claims of US$549.9 billion, an advance of 1.88 percent, or US$13.34 billion, from three months earlier and increasing for six quarters in a row, the central bank said.
US government bonds accounted for the bulk of the extra exposure, it added.
The fund movement is not surprising, as the US Federal Reserve raised interest rates again in the second quarter, but Taiwan kept policy rates unchanged, it said.
Taiwan’s widening interest rate differences with the US spurred capital outflows from Taiwan and other Asian markets, and the trend persists, explaining why the local currency on Thursday weakened to NT$32.268 against the greenback in Taipei trading, it said.
“Global capital constantly moves around in pursuit of better returns,” the central bank said.
China was Taiwan’s second-largest debtor, but the overall exposure dropped to a new low since June 2020, the central bank said.
The pace of the retreat is not evident following insolvency reports over China’s major property developers, but had more to do with diminished business opportunity amid an economic slowdown, the central bank said.
Other countries such as Luxembourg, Hong Kong, Australia, Japan, the UK, Vietnam, Singapore and the Cayman Islands also made Taiwan’s top-10 debtor’s list with collective exposure valued at US$405.8 billion, the central bank said.
Taiwan’s exposure to Japan fell by one notch to sixth place, as Japan also suffered capital flight linked to its ultra-low interest rates, it said.
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