Taiwan Slashes Financial Exposure to China Amid Economic Turmoil

Taipei, July 17, 2025 — Taiwan has dramatically reduced its financial exposure to China, pulling billions of dollars from its banking, insurance, and securities sectors as concerns mount over Beijing’s faltering economy and political instability.
According to Taiwan’s Financial Supervisory Commission (FSC), the island’s total financial exposure to China fell by NT$201.3 billion (US$6.87 billion) year-on-year, marking a nearly 20% decline to NT$828.39 billion (US$28.25 billion) by the end of May. The move reflects growing caution among Taiwanese institutions amid China’s deepening property crisis and sluggish economic recovery.
Banking Sector Leads the Retreat
Banks accounted for 92% of Taiwan’s total exposure, with interbank loans to China plunging 35% year-on-year. CTBC Bank held the highest exposure at NT$180 billion, followed by Taipei Fubon Bank and Bank SinoPac. The banking sector’s exposure-to-net-worth ratio dropped to a record low of 15.9%, signaling a strategic shift away from Chinese financial markets.
Insurance and Securities Follow Suit
Taiwanese life insurers slashed their investments in Chinese marketable securities by 30%, totaling NT$49.9 billion, while securities and futures firms cut their exposure by 21%, down to NT$10.04 billion. Officials cited concerns over U.S. tariff policies, currency volatility, and China’s unpredictable regulatory environment as key drivers of the pullback.
Strategic Decoupling Gains Momentum
The financial retreat underscores a broader trend of economic decoupling between Taiwan and China. Taiwanese firms have increasingly diversified investments toward Southeast Asia and the United States, reflecting a shift in global supply chains and geopolitical alignments.
Chang Chia-kuei, chief secretary of the FSC’s Banking Bureau, emphasized the strategic nature of the move: “The decline highlights increasing caution among Taiwanese lenders regarding China’s economic trajectory and property sector risks”.
As China grapples with mounting debt, a deflating real estate bubble, and waning investor confidence, Taiwan’s financial pivot may signal a new phase in cross-strait economic relations—one defined more by risk aversion than integration.