Tuesday, September 05, 2023

Alarm over British taxpayers’ £500m exposure to Taiwan

Simon Foy
THE TELEGRAPH
Sat, 2 September 2023

Taiwan faces the threat of China invading its self-governed state
 - AP Photo/Chiang Ying-ying

The British taxpayer’s exposure to investments in Taiwan is being investigated amid concerns about the growing political tensions between the island state and China.

UK Export Finance (UKEF) has hired private consultants from Deloitte to examine the risks of supporting future offshore wind projects in Taiwan after giving £500m of taxpayer backing to the sector since 2019.

The state-backed body provides guarantees to help UK exporters win contracts abroad and picks up the tab if the customer fails to pay up.

The review will examine the legal, economic and commercial risks associated with backing future projects in Taiwan and determine UKEF’s risk appetite for further credit exposure to the country.

It comes amid rapidly escalating tensions in the region, with fears that China could invade the self-governing state.

Chinese President Xi Jinping previously vowed to “reunify” Taiwan with China, prompting US President Joe Biden to pledge that the US would defend the territory from any invasion.

The tensions have forced investors to rethink their exposure to the country, with Warren Buffett selling his entire stake in the world’s largest chipmaker earlier this year owing to it being headquartered in Taiwan.

Asked to explain his decision, the billionaire, dubbed the “Oracle of Omaha”, said: “I don’t like its location, and I’ve reevaluated that.

“I feel better about the capital that we’ve got deployed in Japan than in Taiwan. I wish it weren’t so, but I think that’s the reality, and I’ve reevaluated that in the light of certain things that were going on.”

UKEF, which is tied to the Department for International Trade, has provided credit guarantees worth £500m to help finance three offshore wind projects in Taiwan since 2019. The most recent guarantee came in 2021 when Liz Truss was international development secretary.

Ms Truss, the former prime minister, has been a vocal proponent of the West supporting Taiwan amid aggression from Beijing.

In a visit to the state in May to show “solidarity”, Ms Truss said that Taiwan is “on the front line of the global battle for freedom” and called for an “economic Nato” to challenge China.

The Government, which has strong informal ties but no official diplomatic relations with Taipei, distanced itself from the visit.

A spokesman for UKEF said: “UKEF has a market appetite of over £4bn to support new business in Taiwan. We’ve supported several offshore wind projects in Taiwan, which is a growing market for renewable energy investments.

“UKEF actively monitors all its exposures and carries out regular market risk assessments.”

UKEF is led by Tim Reid, a former senior banker at HSBC.

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