Cross-border financing in Asia is being reshaped by the relocation of supply chains and the fragmentation of production bases across multiple markets. For Taiwanese corporates, this shift reflects a move away from centralised manufacturing in mainland China towards a more distributed footprint across Southeast Asia, India and, increasingly, other markets aligned to global trade flows.

This transition is driven by a combination of geopolitical tensions, tariff considerations and the need for supply chain resilience. As production is reallocated, financing requirements are no longer confined to a single market or currency but must support operations across multiple jurisdictions simultaneously.

As a result, cross-border financing is becoming more structured. It is no longer defined by individual lending relationships or standalone transactions, but by the need to coordinate capital, risk and liquidity across markets.

Cathay United Bank has adapted its corporate banking model in response. Michael Wen, executive vice president and head of corporate finance products, oversees debt capital markets, loan syndication, leveraged finance, environmental, social and governance-linked financing and project finance advisory, alongside financial sponsor coverage.

Drawing from this experience, Wen described how cross-border financing is evolving in practice, focusing on how capital is structured, how risks are managed and how banks support clients expanding beyond their home markets.This shift is also redefining the role of banks. Rather than acting as single-source lenders, institutions are increasingly required to coordinate financing across markets, instruments and counterparties, particularly as clients expand into jurisdictions where regulatory and funding conditions differ significantly.

From single-point lending to coordinated cross-border structures

Historically, Taiwanese corporates expanding overseas relied on relatively simple financing models. Production was concentrated, primarily in mainland China, and funding was often arranged at the parent level in Taiwan, with banks extending credit based on a single-point risk assessment.

Wen explained that this model reflected an earlier phase of globalisation, where cost-driven centralisation shaped both operations and financing. Corporates could rely on a single banking relationship and expand their funding options gradually as their overseas operations matured.

That model has changed as corporates were “reallocating their production base to Southeast Asia or India” in response to tariffs and geopolitical shifts. In some cases, clients are also establishing operations in Central America to access tariff advantages when exporting to the United States, adding another layer to cross-border structuring.

Instead of a single lending relationship, banks were now required to provide what Wen described as a “comprehensive financing solution” across multiple jurisdictions. This included loans, guarantees, trade finance and treasury services integrated into a single framework.

A practical example is Malaysia, where foreign banks face restrictions in providing local currency lending. In such cases, Cathay United Bank structured financing through guarantees or standby letters of credit, enabling local Malaysian banks to extend ringgit-denominated loans. This effectively transferred credit risk while ensuring that clients could access funding in the required currency.

These arrangements illustrated how cross-border financing now operates. Capital was structured across markets, with offshore guarantees supporting onshore lending and different institutions providing specific components of the financing stack depending on regulatory and market constraints.

In this model, the bank’s role shifts towards structuring and coordination. Rather than holding the full credit exposure, banks increasingly facilitate funding by linking offshore credit support with onshore lending capacity, effectively bridging regulatory gaps between markets.

Supply chain relocation creates multi-currency and ecosystem-driven financing demand

The decentralisation of production has created more complex financing needs, particularly in managing currencies, working capital and liquidity across markets. Corporates operating across jurisdictions must manage multiple currencies simultaneously.

Wen pointed out that a typical client might export in United States dollars, incur costs in local currencies such as Malaysian ringgit and report in New Taiwan dollars. This created continuous demand for foreign exchange hedging and cash management solutions.

Banks were therefore required to provide integrated solutions that went beyond lending. Hedging, cash management and working capital financing became part of the same cross-border financing framework, rather than standalone services.

At the same time, demand is increasingly driven by sector-specific ecosystems. Wen highlighted strong financing demand from the semiconductor and artificial intelligence supply chain, driven by large technology companies such as NVIDIA and hyperscale cloud providers.

This demand extends across the ecosystem, including integrated circuit design, server manufacturing, rack infrastructure and thermal management. Financing is therefore not limited to large corporates but extends across multiple layers of suppliers.

In this context, supply chain financing becomes critical. Wen noted that banks structure financing based on the credit strength of anchor clients, where repayment may rely on “big brand names… in the US or other Organisation for Economic Co-operation and Development countries.”

Depending on the transaction, financing may be structured through open account, telegraphic transfer or traditional documentary trade, reflecting the underlying commercial arrangements. Each structure carries different risk implications, with documentary trade offering greater security through bank intermediation, while open account transactions require stronger reliance on counterparty credit.

Banks therefore calibrate financing structures based on trade terms and counterparty profiles, aligning credit exposure with underlying commercial flows rather than applying a single financing model across all transactions.

SME financing depends on guarantees and supply chain anchoring

While larger corporates are able to access financing across markets, smaller and medium-sized enterprises (SMEs) face more constraints. Wen acknowledged that “it will be a challenge” for smaller firms to secure financing, particularly when entering new markets without established credit profiles.

In Taiwan, this gap is addressed through government-backed guarantee mechanisms. The Small and Medium Enterprise Credit Guarantee Fund and the Overseas Credit Guarantee Fund provide partial guarantees on lending, reducing the risk borne by commercial banks.

Wen noted that banks “co-work with this government guaranteed fund to lower down our lending risk”. These guarantees allow banks to expand lending access for SMEs that would otherwise fall outside their standard risk appetite.

Beyond guarantees, supply chain financing provides another channel. SMEs linked to large corporate buyers can access financing based on the credit strength of those buyers, with repayment tied to receivables or trade flows.

This structure effectively shifts credit risk from smaller borrowers to stronger counterparties, enabling cross-border financing to flow through supply chains rather than relying solely on borrower creditworthiness.
Even with these mechanisms, scalability remains uneven. Larger mid-sized firms can access financing more easily, while smaller firms remain dependent on guarantees and supply chain linkages.

However, the effectiveness of this model depends on the presence of strong anchor clients and well-established supply chain relationships. Where such linkages are weaker, SMEs remain more reliant on guarantees and face greater challenges in accessing cross-border financing.

Financial sponsors reshape cross-border financing through syndication and evolving M&A activity

The role of financial sponsors has introduced a different dynamic into cross-border financing. Unlike corporates, whose financing needs are relatively predictable, sponsor-driven transactions are event-based and often require rapid execution.

Wen described sponsor financing as “very dynamic”, with banks only becoming involved once a bid has been won. At that point, financing must be arranged quickly, often within compressed timelines.

Transactions are typically structured through syndication, with multiple banks participating in large-ticket deals. Wen noted that more than ten banks may be involved in some transactions, each taking a portion of the exposure.

In these structures, banks may initially underwrite portions of the loan before distributing the exposure across the syndicate, balancing the need to secure mandates with the objective of managing balance sheet usage.

The capital structure in these deals is layered. Sponsors provide equity, while banks participate in syndicated senior lending. In higher-risk markets, additional layers such as mezzanine financing or support from development finance institutions may be included.

Wen indicated that the scale of private equity-backed sponsor financing is in the billions of dollars, with double-digit annual growth. He also noted that more than 85% of sponsor-related activity, by deal count, is conducted outside Taiwan, reflecting the international nature of these transactions.

He further noted that sponsor activity in Japan is increasing, with the bank planning to establish a Tokyo branch to support this activity. Wen described sentiment among sponsors and banks towards Japan as positive, with expectations of continued deal activity over the coming years.

Compared to traditional corporate lending, sponsor transactions require greater speed, coordination and risk distribution, reinforcing the shift towards syndicated and structured financing models.

Sustainable finance expands but remains constrained by bankability and verification

Sustainable and transition finance are becoming increasingly important in cross-border financing, particularly in sectors such as energy, infrastructure and manufacturing.

Cathay United Bank has expanded its activities from green lending for renewable energy projects to transition financing that supports clients in reducing carbon emissions. This includes financing for new equipment or vessels that improve energy efficiency.

Wen noted that demand for sustainable financing remains strong, particularly as global buyers require suppliers to adopt renewable energy and meet sustainability standards.

However, he identified bankability as the main constraint. Smaller firms often lack the resources, technical capability and funding required to meet sustainability requirements, particularly the need for third-party verification of performance metrics.

These requirements introduce additional costs and complexity, which smaller firms may struggle to absorb, limiting their ability to access sustainable financing.

Wen pointed out that support mechanisms differ across markets. Hong Kong and Singapore have government-supported grant schemes, such as green and sustainable finance grant programmes, that reimburse fund raisers for sustainable finance-related advisory and assurance fees, while many Southeast Asian markets lack similar grant schemes. Thus, in these markets, CUB works with clients to identify meaningful targets and credible pathways based on existing information.

To address broader credit risk challenges in cross-border financing, structures increasingly involve governments and multilateral institutions providing guarantees, equity participation or mezzanine financing. These arrangements, which are distinct from the grant-based frameworks in Hong Kong and Singapore, allow commercial banks to participate in senior lending with more manageable risk exposure.

Infrastructure demand is strong but depends on coordinated risk sharing

Infrastructure financing, including digital infrastructure such as data centres and semiconductor facilities, continues to drive demand for cross-border capital in Asia.

Wen noted that demand for infrastructure financing in Asia Pacific remains strong, reflecting both economic development and digitalisation trends.

However, commercial banks face constraints in supporting these projects independently due to risk considerations. Infrastructure investments involve long tenors, regulatory complexity and execution risks.

Wen emphasised that commercial banks require support from governments and multilateral institutions to participate effectively. Without such support, financing capacity remains limited.

In practice, this results in structured financing models where risk is distributed across participants. Public sector or multilateral institutions may provide guarantees or subordinated capital, while commercial banks provide senior lending.

These arrangements enable cross-border infrastructure financing to proceed in markets where standalone bank lending would be constrained.

This layered approach allows banks to participate in projects while managing exposure, particularly in markets where standalone lending would not meet internal risk thresholds.

Cross-border financing depends on structuring capital and risk across markets

Cross-border financing is increasingly shaped by how capital is structured across jurisdictions, currencies and risk frameworks rather than by a single lending relationship.

For Taiwanese corporates expanding globally, this requires financing models that can support operations across multiple markets and manage different regulatory and currency environments.

Cathay United Bank’s approach reflects this shift. Wen described how the bank structures financing through guarantees, syndication, supply chain linkages and coordination with other financial institutions.

At the same time, the growth of financial sponsors and sustainable finance has increased the complexity of transactions, requiring multiple layers of capital and participation from both private and public sector entities. As Wen indicated, cross-border financing depends on the ability to align risk, regulation and execution across markets, with capital structured across participants rather than extended from a single source.

In this environment, banks that can structure and coordinate capital across jurisdictions will be better positioned to support clients expanding beyond borders.