Taiwan’s media have truly followed the government’s every move in the latest Cabinet personnel changes: Premier Sean Chen (陳冲) planned to resign… The possible successor to Chen was… and President Ma Ying-jeou’s (馬英九) approval rating.…, et cetera. However, the major challenge facing Taiwan today is on the economic front and the reappointment of central bank Governor Perng Fai-nan (彭淮南) for another five-year term is as important as Vice Premier Jiang Yi-huah (江宜樺) replacing Chen.
On Friday, local media cited sources at the Presidential Office and Legislative Yuan as saying that Perng, whose third term in office ends on Feb. 25, will continue for another five years as the top monetary policymaker. Perng has headed the central bank since February 1998, and his reappointment will make him the nation’s longest-serving central bank governor.
Over the past 15 years, the nation has faced several challenges domestically and internationally, including the 1997-1998 Asian financial crisis, the Sept. 21, 1999, earthquake, democratic transition in 2000 and the 2008-2009 global financial crisis.
The central bank under Perng’s leadership has used various monetary tools to fine-tune currency and interest rates to maintain stability in domestic consumer prices and financial markets, and guide the nation through turbulent global waters over the years.
At the end of last year, Taiwan’s foreign exchange reserves rose to a high of US$403.17 billion, and over the past 15 years the central bank has contributed more than NT$2 trillion (US$67.5 billion) to state coffers from the increase in foreign exchange reserves. Even though some people have criticized the central bank’s “weak currency” stance for increasing Taiwanese exporters’ operating costs compared with those of their South Korean rivals, the New Taiwan dollar has seen a less volatile exchange rate between 1998 and last year than the South Korean won.
Last year, Global Finance magazine rated Perng among the world’s best central bankers for the eighth straight year. He is the only central banker to have won an “A” rating nine times from the New York-based magazine. However, how much longer will Perng enjoy his top ranking in the world, as he faces more challenges in his next five-year term?
First, as central banks in advanced countries, especially Japan, Europe and the US, have been pursuing aggressive monetary easing to boost their economies, the depreciation pressures on Asian currencies have become a hot issue for many of the region’s export-oriented economies. Perng faces the challenge of trying to adopt balanced policies that can maintain a competitive national currency amid a potential global devaluation race without increasing inflation because of the higher costs of imported goods.
Second, property prices are high in Taiwan, especially in the Greater Taipei area, largely because of the central bank’s low interest rate policy, the government’s reduction of inheritance tax and advanced economies’ quantitative easing measures that have ensured ample market liquidity and indirectly led to an influx of speculative capital into the real-estate sector. This low interest rate environment also constrains the earnings of local financial institutions.
How the central bank can move in a measured way to reverse the low interest rate environment without compromising economic development will be Perng’s second major challenge.
Third is the challenge of developing Taiwan into a major offshore center of trade for the Chinese yuan, while safeguarding the nation’s financial stability.
In the short term, the central bank needs to ensure a smooth implementation of direct currency exchanges and capital flows across the Taiwan Strait.
In the longer term, the central bank will need to talk with its Chinese counterpart about the establishment of a cross-strait currency swap mechanism before adding yuan-based assets to Taiwan’s foreign exchange reserves and serving as a backstop against regional economic turmoil.
Concerns that the US might abandon Taiwan are often overstated. While US President Donald Trump’s handling of Ukraine raised unease in Taiwan, it is crucial to recognize that Taiwan is not Ukraine. Under Trump, the US views Ukraine largely as a European problem, whereas the Indo-Pacific region remains its primary geopolitical focus. Taipei holds immense strategic value for Washington and is unlikely to be treated as a bargaining chip in US-China relations. Trump’s vision of “making America great again” would be directly undermined by any move to abandon Taiwan. Despite the rhetoric of “America First,” the Trump administration understands the necessity of
US President Donald Trump’s challenge to domestic American economic-political priorities, and abroad to the global balance of power, are not a threat to the security of Taiwan. Trump’s success can go far to contain the real threat — the Chinese Communist Party’s (CCP) surge to hegemony — while offering expanded defensive opportunities for Taiwan. In a stunning affirmation of the CCP policy of “forceful reunification,” an obscene euphemism for the invasion of Taiwan and the destruction of its democracy, on March 13, 2024, the People’s Liberation Army’s (PLA) used Chinese social media platforms to show the first-time linkage of three new
If you had a vision of the future where China did not dominate the global car industry, you can kiss those dreams goodbye. That is because US President Donald Trump’s promised 25 percent tariff on auto imports takes an ax to the only bits of the emerging electric vehicle (EV) supply chain that are not already dominated by Beijing. The biggest losers when the levies take effect this week would be Japan and South Korea. They account for one-third of the cars imported into the US, and as much as two-thirds of those imported from outside North America. (Mexico and Canada, while
I have heard people equate the government’s stance on resisting forced unification with China or the conditional reinstatement of the military court system with the rise of the Nazis before World War II. The comparison is absurd. There is no meaningful parallel between the government and Nazi Germany, nor does such a mindset exist within the general public in Taiwan. It is important to remember that the German public bore some responsibility for the horrors of the Holocaust. Post-World War II Germany’s transitional justice efforts were rooted in a national reckoning and introspection. Many Jews were sent to concentration camps not
RSS