Outstanding loans extended by banks in Taiwan saw record growth of 3.23% in Nov.

Dec 29, 2003 Ι Industry In-Focus Ι Furniture Ι By Judy, CENS
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Taipei, Dec. 29, 2003 (CENS)--Total outstanding loans extended by all financial institutions in Taiwan stood at NT$12.48 trillion (US$367.1 billion at US$1 = NT$34) as of the end of November, up 3.23% from the same period of last year, the highest growth of its kind in three years, according to statistics issued by the Central Bank of China.

In the same month Taiwan's major financial institutions saw an increase of NT$160 billion (US$4.71 billion) in their investments in and loans to private enterprises as a result of increasingly active investment by private firms. Total outstanding loans to the government and state-run enterprises decreased.

Financial experts attributed the gradual business recovery of domestic enterprises to CBC's loose monetary policy over the past three years. To encourage domestic investments, CBC has lowered its key rates for 15 times since the end of December 2000. As a result, the rediscount rate and the rate for secured accommodations to enterprises declined to a historical low of 1.375% and 1.75%, respectively. The experts believed that CBC would continue the low-interest rate policy to maintain the island's upbeat economic trend.

CBC's statistics showed that total outstanding investment made and loans granted by financial institutions in Taiwan came to NT$15.64 trillion (US$460 billion) as of the end of November. The figure grew 2.54% from one year earlier, for the highest growth of its kind in three years. And, of which, total outstanding loans accounted for NT$13.85 trillion (US$407.4 billion), the largest amount since August of 2001.

With the rising demand for capital funds by private sectors, the annual growth rate of M2 money supply, the broadest measure of money flows, has posted an upward trend since May of this year. The annual growth rate of M2 money supply in November posted at 5.61%, exceeding the CBC's ceiling range of 5.5%, although the average rate in the first 11 months was 3.61%, well within the target range of 1.5%-5.5% set by CBC for the year.

Shih Tsun-hua, deputy director general of CBC's Economic Research Dept., explained that the CBC set the target range for M2 money supply growth mainly based on the economic growth rate and the commodity price inflation rate. However, major factors affecting the M2 money supply growth include the inflow and outflow of foreign capital funds, trade surplus, and loans and investments recorded by banks.

If including bond funds, the annual growth rate of M2 money supply in November of the year was 7.49%, up 0.29 of a percentage point from a month earlier and the highest since June of 2000. As for M1A and M1B, they saw an annual growth rate of 19.52% and 19.09%, respectively, in November. Compared to October of the same year, the former rose by 1.39 percentage points and the latter edged up 0.05 of a percentage point. The growth rate of M1A in November was the highest in 11 years, and that of M1B a new high since August of 2002.

According to CBC, M1A refers to currency in circulation, checking accounts, and passbook deposits; and M1B is M1A plus passbook savings deposits. M2 is M1B plus quasi-money, including time and savings deposits, foreign currency deposits, and postal savings deposits, etc.

Shih pointed out that the transaction in the stock market affects the circulation of passbook deposits and time deposits, which heavily affect the money supply of M1A and M1B. In November the outstanding passbook savings of financial institutions on the island hit a new high of NT$5.634 trillion (US$165.7 billion), up 19% from the corresponding month of last year; while the outstanding time deposits reached NT$1.015 trillion (US$298.53 billion), down 0.95%.
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