A huge increase in foreign-exchange interventions could lead to the US labeling Taiwan a currency manipulator, central bank Governor Yang Chin-long (楊金龍) said yesterday, but he added that the designation is unlikely to have any immediate negative impact on the nation’s export-dependent economy.
“It is possible that Taiwan might be listed as a manipulator,” Yang told lawmakers in Taipei as he delivered a report.
However, Yang said that the US’ criteria for labeling another economy a currency manipulator are no longer suitable, as the global economy has changed over the past year.
Photo: Chien Jung-fong, Taipei Times
Taiwan’s high-trade surplus with the US, one of the US Department of the Treasury’s three criteria, is due to strong demand from US companies for semiconductors, rather than any perceived unfair advantage Taiwan has gained from its currency intervention, Yang said.
“If they want to reduce our trade surplus with them, then we could just stop selling them our chips,” he told lawmakers. “But they need them.”
The central bank stepped up its intervention in markets in the second half of last year as it tried to stop the New Taiwan dollar from strengthening on the back of the booming economy and trade.
Although being listed as a manipulator by the US has no immediate or specific consequences, Yang said the central bank would discuss its interventions and trade surplus with US Treasury officials.
The central bank’s net currency purchases surged more than 600 percent to US$39.1 billion last year, according to the report Yang delivered to lawmakers.
That equals 5.8 percent of Taiwan’s GDP, according to Bloomberg calculations, well above the US Treasury’s 2 percent threshold. In 2019, the central bank reported net purchases of US$5.5 billion.
Yang said that capital inflows had slowed since mid-January.
The central bank reported conducting what it calls currency “smoothing” operations in January, but not in the past month, according to earlier statements.
The US Treasury has three criteria for listing an economy as a currency manipulator: a current-account surplus equivalent to 2 percent of GDP, a bilateral trade surplus of at least US$20 billion and “persistent, one-sided” foreign-exchange interventions worth at least 2 percent of GDP.
Taiwan was added to the currency watch list in the latest US report in December last year, but was not listed a currency manipulator.
The US cited the “persistently large” current account surplus of 10.9 percent of GDP in the year to June and a US$25 billion trade surplus with the US as reasons for its addition to the watch list.
Being designated a currency manipulator requires the US to engage with the perceived offender to address the imbalance.
Yang said the central bank would revise upward its economic growth forecast on Thursday next week, when the bank’s board of directors is set to meet at its quarterly meeting to decide if it is necessary to adjust the bank’s monetary policy.
The bank on Dec. 17 last year predicted the economy to expand 3.68 percent this year, while the Directorate-General of Budget, Accounting and Statistics on Feb. 20 upgraded the GDP growth forecast for this year to 4.64 percent, up from the previous forecast of 3.83 percent.
The nation’s economy has grown steadily and the inflation outlook remains mild, but Taiwan still faces potential external risks, such as the effectiveness of COVID-19 vaccines, fluctuations in global financial markets and uncertainties in the international trade environment, Yang said.
Additional reporting by staff writer
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
ADVERSARIES: The new list includes 11 entities in China and one in Taiwan, which is a local branch of Chinese cloud computing firm Inspur Group The US added dozens of entities to a trade blacklist on Tuesday, the US Department of Commerce said, in part to disrupt Beijing’s artificial intelligence (AI) and advanced computing capabilities. The action affects 80 entities from countries including China, the United Arab Emirates and Iran, with the commerce department citing their “activities contrary to US national security and foreign policy.” Those added to the “entity list” are restricted from obtaining US items and technologies without government authorization. “We will not allow adversaries to exploit American technology to bolster their own militaries and threaten American lives,” US Secretary of Commerce Howard Lutnick said. The entities
Minister of Finance Chuang Tsui-yun (莊翠雲) yesterday told lawmakers that she “would not speculate,” but a “response plan” has been prepared in case Taiwan is targeted by US President Donald Trump’s reciprocal tariffs, which are to be announced on Wednesday next week. The Trump administration, including US Secretary of the Treasury Scott Bessent, has said that much of the proposed reciprocal tariffs would focus on the 15 countries that have the highest trade surpluses with the US. Bessent has referred to those countries as the “dirty 15,” but has not named them. Last year, Taiwan’s US$73.9 billion trade surplus with the US
Prices of gasoline and diesel products at domestic gas stations are to fall NT$0.2 and NT$0.1 per liter respectively this week, even though international crude oil prices rose last week, CPC Corp, Taiwan (台灣中油) and Formosa Petrochemical Corp (台塑石化) said yesterday. International crude oil prices continued rising last week, as the US Energy Information Administration reported a larger-than-expected drop in US commercial crude oil inventories, CPC said in a statement. Based on the company’s floating oil price formula, the cost of crude oil rose 2.38 percent last week from a week earlier, it said. News that US President Donald Trump plans a “secondary