Fitch cautious on Taiwan ‘Southbound Policy’

Fitch remains cautious on the Taiwan government’s recent so-called ‘southbound’ policy, which encourages banks to lend to emerging Asian economies other than China. The rating agency says the initiative would help to diversify the banks’ overseas exposure in the longer term amid cooler cross-strait relations and caution over rising financial risks in mainland China. But these benefits could be at least partly “offset by higher operational and credit risks associated with lending to unfamiliar and challenging markets,” the firm notes, adding that southbound lending is unlikely to rise strongly enough in the next few years to have a rating impact on Taiwanese banks, which are still heavily exposed to China. (WSJ)