The business climate and market sentiment often change rapidly, leaving investors with little time to catch their breath and reflect on exactly what’s going on.
Many investors were caught unaware by the unexpectedly slow growth of exports last month, which signaled that the nation’s economic growth was set to weaken in the second half of the year.
On Thursday, the Ministry of Finance reported that exports last month grew at a pace of 8 percent year-on-year to US$22.87 billion, which not only decelerated substantially from a 21.3 percent rise to US$24.35 billion in the prior month, but also ended 11 months of double-digit export growth since August last year.
With imports increasing 12.3 percent year-on-year last month to US$23.28 billion because of soaring oil prices, Taiwan reported a trade deficit of US$410 million last month — the nation’s first trade deficit since March 2006.
The latest external trade figures caught people off guard because the data came just as the prices of global crude oil dropped nearly 20 percent from a record US$147.27 per barrel on July 11 and as prices of several grain commodities dropped substantially in recent weeks, which somewhat soothed public concern at rising inflation.
The latest trade data showed an across-the-board weakness in Taiwan’s export performance. But, most importantly, slowing exports to China (Hong Kong included) last month — a 4 percent increase year-on-year last month following a 25.5 percent rise the previous month — confirmed that the global slowdown has begun to take a toll on China and has negatively affected the demand for Taiwanese goods from a country that is already our largest export destination.
The recent plunge in the value of the NT dollar against the US dollar — dropping by NT$0.683, or 2.25 percent, over the past nine consecutive sessions — demonstrated similar bearish sentiment in the foreign exchange market.
If this pessimistic mood continues, it is likely we will see the local currency weaken further, property markets turn more bearish and domestic consumption diminish, not to mention the prospect of more foreign capital being removed for high-yield investments elsewhere.
The central bank, which has been raising its benchmark interest rates to fight inflation for a consecutive 16 quarters since October 2004, could face the dilemma of choosing to continue to focus on inflation controls with more rate hikes or shift its focus to stimulating the economy via rate cuts.
On the one hand, inflation driven by rising import costs remains a concern because the latest government data show that the consumer price index (CPI) climbed 5.92 percent year-on-year last month, marking its highest level of growth since September 1994. Excluding volatile vegetables, aquatic products and energy prices, the core CPI growth rate also hit a nearly 12-year high of 4.06 percent last month, indicating that the pressure on consumer prices remained high.
On the other hand, Taiwan’s export-oriented electronics companies are likely to benefit from a falling NT dollar and that in turn will help boost the economy. But these companies’ gain from a favorable currency exchange could be offset by the downturn of the global economy in the next few months if energy and materials costs remain high.
The nation’s policymakers should move fast to boost domestic demand and consumption, as global economic difficulties will most likely continue well into next year and as economic optimism over improved cross-strait relations is fading fast.
Chinese Nationalist Party (KMT) caucus whip Fu Kun-chi (傅?萁) has caused havoc with his attempts to overturn the democratic and constitutional order in the legislature. If we look at this devolution from the context of a transition to democracy from authoritarianism in a culturally Chinese sense — that of zhonghua (中華) — then we are playing witness to a servile spirit from a millennia-old form of totalitarianism that is intent on damaging the nation’s hard-won democracy. This servile spirit is ingrained in Chinese culture. About a century ago, Chinese satirist and author Lu Xun (魯迅) saw through the servile nature of
In their New York Times bestseller How Democracies Die, Harvard political scientists Steven Levitsky and Daniel Ziblatt said that democracies today “may die at the hands not of generals but of elected leaders. Many government efforts to subvert democracy are ‘legal,’ in the sense that they are approved by the legislature or accepted by the courts. They may even be portrayed as efforts to improve democracy — making the judiciary more efficient, combating corruption, or cleaning up the electoral process.” Moreover, the two authors observe that those who denounce such legal threats to democracy are often “dismissed as exaggerating or
Monday was the 37th anniversary of former president Chiang Ching-kuo’s (蔣經國) death. Chiang — a son of former president Chiang Kai-shek (蔣介石), who had implemented party-state rule and martial law in Taiwan — has a complicated legacy. Whether one looks at his time in power in a positive or negative light depends very much on who they are, and what their relationship with the Chinese Nationalist Party (KMT) is. Although toward the end of his life Chiang Ching-kuo lifted martial law and steered Taiwan onto the path of democratization, these changes were forced upon him by internal and external pressures,
The Chinese Nationalist Party (KMT) caucus in the Legislative Yuan has made an internal decision to freeze NT$1.8 billion (US$54.7 million) of the indigenous submarine project’s NT$2 billion budget. This means that up to 90 percent of the budget cannot be utilized. It would only be accessible if the legislature agrees to lift the freeze sometime in the future. However, for Taiwan to construct its own submarines, it must rely on foreign support for several key pieces of equipment and technology. These foreign supporters would also be forced to endure significant pressure, infiltration and influence from Beijing. In other words,
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