Taiwan c.bank warns of growing risks in Chinese banking market

TAIPEI Thu May 29, 2014 10:21pm EDT

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TAIPEI May 30 (Reuters) - Taiwan's central bank warned local banks of growing risk to their operations in China amid the mainland's slowing economic growth, though the central bank still sees opportunities to expand into the Chinese market.

In its annual financial stability report, the central bank said that Chinese corporate earnings growth is slowing and default risk is climbing as solar power companies and other industries face a glut of supply, as well as mounting local government debt.

China's banking sector might also face more severe competition, include a narrower interest-rate spread in the future, following reforms introduced last year by the People's Bank of China, the report published late on Thursday said.

Banking ties across the Taiwan Strait have picked up in recent years. Local banks have opened 11 branches with assets totaling T$151.3 billion ($5 billion) as of end-2013.

China sees small and medium-sized enterprises (SME) as increasingly important, an advantage to Taiwanese banks which have expertise in that sector from their home market, as well in wealth management for rich mainlanders.

Exposure of Taiwan banks to the mainland was T$1.58 trillion as of end-March, the report said.

(Reporting by Faith Hung; Editing by Eric Meijer)

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