Taiwan is suffering its worst ever economic recession in 26 years. Its economy shrank 4.21 percent in the third quarter of this year compared with last year. Unemployment swelled to 5.36 percent in October. While the November unemployment rate experienced its first drop in 13 months, easing down to 5.28 percent, it is only a seasonal change and short-lived.
Because of partisan bickering, economic reality got mired in political ideology, especially during the Dec. 1 election campaign. Pro-China opposition parties often blame Taiwan's economic malaise on the ruling DPP's lack of administrative experience and its failure to further Taiwan-China integration. Together with pro-China businesses and media, they successfully pressed the government to ease the "No Haste, Be Patient" (
Before the Dec. 1 elections, Mainland Affairs Council Chairwoman Tsai Ing-wen (
Can Taiwan's economic slump be turned around by the new cross-strait investment policy? The answer is no. Taiwan has become a highly open economy after launching a series of tariff reductions and trade liberalization measures beginning in the late 1980s. Taiwan is integrated into the global economy, forcing it to specialize in an ever-narrowing range of the world's industries. Today, the world's largest wafer foundry -- belonging to Taiwan Semiconductor Manufacturing (台積電) -- can even serve as a barometer of the global semiconductor industry. Industry specialization enhances economic efficiency, while exposing an open economy to global business cycles.
Taiwan will become a WTO member on Tuesday. This will hasten globalization and further deepen Taiwan's industrial specialization, not only making pronounced economic fluctuations unavoidable, but also increasingly limiting the government's short-term ability to fine-tune the nation's economy through traditional monetary and fiscal polices.
Taiwan's economic fluctuations are synchronized with world economies and, in particular, the US economy. After five years of technology-led expansion, US economic activity peaked in March of last year and has since slipped into recession. Simultaneously, its main trading partners were dragged into a severe economic downturn.
There is no panacea for a small open economy to fight worldwide recession. Macroeconomic fine-tuning policies, such as lower interest rates, currency devaluation and fiscal expansion, are needed to help mitigate economic recession, but they only have limited effects on a small, open and highly specialized economy, like Taiwan's.
In fact, the government should focus more attention on microeconomic policies designed to, among other things, solidify the economy's tax base, improve financial market efficiency, spur product and process innovation, strengthen intellectual property rights protection and make the education system more responsive to changing labor market demands.
What matters is whether Taiwan's economy is resilient enough to synchronize with the forthcoming global recovery in the short run and also viable enough to prosper in the long run. Easing China-bound investment to further integrate Taiwan into the hostile, developing Chinese economy is not only unnecessary but dangerous.
Hwan C. Lin is an associate professor of the Economics Department, University of North Carolina at Charlotte.
The return of US president-elect Donald Trump to the White House has injected a new wave of anxiety across the Taiwan Strait. For Taiwan, an island whose very survival depends on the delicate and strategic support from the US, Trump’s election victory raises a cascade of questions and fears about what lies ahead. His approach to international relations — grounded in transactional and unpredictable policies — poses unique risks to Taiwan’s stability, economic prosperity and geopolitical standing. Trump’s first term left a complicated legacy in the region. On the one hand, his administration ramped up arms sales to Taiwan and sanctioned
The Taiwanese have proven to be resilient in the face of disasters and they have resisted continuing attempts to subordinate Taiwan to the People’s Republic of China (PRC). Nonetheless, the Taiwanese can and should do more to become even more resilient and to be better prepared for resistance should the Chinese Communist Party (CCP) try to annex Taiwan. President William Lai (賴清德) argues that the Taiwanese should determine their own fate. This position continues the Democratic Progressive Party’s (DPP) tradition of opposing the CCP’s annexation of Taiwan. Lai challenges the CCP’s narrative by stating that Taiwan is not subordinate to the
US president-elect Donald Trump is to return to the White House in January, but his second term would surely be different from the first. His Cabinet would not include former US secretary of state Mike Pompeo and former US national security adviser John Bolton, both outspoken supporters of Taiwan. Trump is expected to implement a transactionalist approach to Taiwan, including measures such as demanding that Taiwan pay a high “protection fee” or requiring that Taiwan’s military spending amount to at least 10 percent of its GDP. However, if the Chinese Communist Party (CCP) invades Taiwan, it is doubtful that Trump would dispatch
Taiwan Semiconductor Manufacturing Co (TSMC) has been dubbed Taiwan’s “sacred mountain.” In the past few years, it has invested in the construction of fabs in the US, Japan and Europe, and has long been a world-leading super enterprise — a source of pride for Taiwanese. However, many erroneous news reports, some part of cognitive warfare campaigns, have appeared online, intentionally spreading the false idea that TSMC is not really a Taiwanese company. It is true that TSMC depositary receipts can be purchased on the US securities market, and the proportion of foreign investment in the company is high. However, this reflects the
RSS