Certain Taiwanese financial institutes are starting to tighten their credit policies on three industries that have been affected by intense market competition from China, including LED, solar energy and displays, reported UDN recently.

Chinese government policies heavily subsidizing displays, LED and solar industries have grabbed market shares from their Taiwanese counterparts, by flooding the market with low priced products. According to insiders in the financial industry, some financial institutes in Taiwan are starting to tighten credit for companies in these industries to lower investment risks.

A director from a credit department at a financial institute outlined a rough guideline for companies subjected to stringent credit reviews—if majority of vendors in these industries are unable to normally pay back loans; the industry outlook is unhealthy or unstable; and the lack of reasonable profits from credit applications.

In recent years, many banks in Taiwan have been limiting the line of credit for industries that have been overtly competitive. Syndicated loans are also included in the line of credit, but the credit limit depends on the respective financial institutes’ capital and net worth.

Taiwanese manufacturers in displays, LED and solar industry line of credit are closely scrutinized by banks because these industries have become overt competitive, said a source from the financial industry.

Intense market competition, price wars, and aggressive competition from Chinese manufacturers has impacted Taiwanese manufacturers developments in solar, LED, and display industries. Hence, enterprises in these industries have been placed on the observer lists by local banks.

Based on statistics compiled from Taiwan’s Central Bank as of first quarter of 2016, total loans issued by banks reached NT $22 trillion (US $ 675.95 billion), contracting 2.7% or more than NT $600 billion compared to the same period last year. Approved loans to companies in computing, optic manufacturing, and electronic component industries declined the most.

Line of credit limits will be included in short term and mid-term credit calculations, and includes syndicated loans, said those in the financial industry.