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Taiwan banks' exposure to China hit new high amid growing trade

TAIPEI -- Exposure of banks operating in Taiwan to China continued to hit a fresh high at the end of March amid warming business ties across the Taiwan Strait, according to Taiwan's central bank.

The central bank said China remained Taiwan's largest debtor at a time when Taiwanese investments in China and bilateral trade have continued growing, while more and more Taiwanese banks have set up footholds across the strait to extend loans.

The bank said that as the Chinese yuan offers relatively high deposit rates, Taiwanese banks have been more willing to raise yuan deposits in their asset portfolios.

Citing statistics, the central bank said outstanding international claims by Taiwanese banks to China at the end of the first quarter on a direct risk basis stood at US$48.85 billion, up from US$45.88 billion recorded a quarter earlier.

On an ultimate risk basis, which calculates consolidated debts shouldered by a country after risk transfers, Taiwanese banks' exposure to China at the end of March rose to US$81.27 billion from the US$64.92 billion recorded at the end of December.

Following China, Luxembourg was the second largest debtor of Taiwan as Taiwanese banks' outstanding international claims to the European country rose to US$42.18 billion at the end of March on a direct risk basis from the US$41.90 billion seen at the end of December.

The United States ranked as the third largest debtor of Taiwan with direct Taiwanese bank exposure at the end of March totaling US$29.53 billion, ahead of Hong Kong with US$29.38 billion in direct bank exposure, and the British West Indies with US$13.72 billion.

The Cayman Islands came in sixth at US$11.35 billion, followed by the U.K. (US$10.33 billion), Singapore (US$6.94 billion), Australia (US$5.43 billion), and Ireland (US$4.25 billion).

At the end of March, the total outstanding international claims by Taiwanese banks hit US$201.96 billion, while the top 10 debtors accounted for 76.77 percent of total exposure.

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