From the Pacific Exchange Blog
Perhaps no sector has more to gain from innovations in financial technology than small- and medium-sized enterprise (SME) finance, especially in Asia. SMEs accounted for 42 percent of Asia’s GDP in 2014 yet received only 18.7 percent of bank lending according to the Asian Development Bank. Fintech can particularly leverage the rapid growth of Asia’s e-commerce and regional trade, trends that complement SME development.
China’s money market is growing rapidly and playing an increasingly important role in the financial system. It serves as both a key channel for monetary policy and as a source of funding for a variety of financial institutions. Recent data reveal that non-bank financial institutions have emerged as the largest borrowers, bringing along new risks to financial stability.
China now has one of the highest leverage ratios among emerging economies, with its corporate debt-to-GDP ratio greater than any other major economy. The debt overhang poses challenges to the country’s economic transition and financial stability, although a full blown banking crisis is unlikely.
This Asia Focus outlines the history of financial and banking reforms in Taiwan, analyzes problems that developed in the banking sector after liberalization, and evaluates current initiatives by regulators to address those problems.