Taiwan’s economic growth in the first half of 2019 outpaced that of the other “Asian tigers” – South Korea, Singapore and Hong Kong – as well as Japan, defying the region’s downturn trend amid declining exports.
Statistics from Taiwan’s Ministry of Economic Affairs show Taiwan’s economy grew 2.4% year-on-year, surpassing South Korea’s 2.1% and Japan’s 1.2%, while both Singapore and Hong Kong were floundering on the edge of a technical recession.
Preliminary data for the third quarter also indicate sustained momentum.
At US$586.1 billion, Taiwan’s gross domestic product was among the world’s top 20 in 2018, on a par with that of Sweden, Belgium and Thailand, according to data from the IMF.
The ministry said the island benefited from a spike in new orders as a growing number of manufacturers were seeking to relocate outside China or outsource their production amid the US-China trade war, and many Taiwanese companies were also returning home to avoid punitive tariffs on their exports to the US.
Based on the ministry’s calculations, Taiwan has an export dependency of 56.6%, among the highest in the region. So the island is not immune from the headwinds in global trade, whose overall exports contracted by 2.5% year-on-year during the first three quarters, but still better than South Korea’s much steeper 9.8% drop, while Japan’s outbound shipments fell 4.8% from January to August.
Taiwan also saw a robust 17.7% increase in exports to the US, the island’s second-largest trading partner, over the past nine months, spurred by a 60.5% surge in exports of information technology, network communications gear and audio-visual products to the US.
Taiwan’s exports to China and Hong Kong dropped by 6.7% in the same period.
Capital, talent moving back
With the economy’s good showing, there has also been an emerging trend of capital and talent repatriation from China, with the island’s Mainland Affairs Council noting last month that there had been a noticeable decline in the number of Taiwanese taking up employment or residence across the strait on the mainland in the first three quarters this year, although it did not release specific figures.
China’s internet censorship, more restrictive political environment, the impact from the trade war and a sagging economy were cited as key factors.
The self-ruled island booked a capital inflow of more than US$8 billion from its own firms operating overseas in the first three quarters, according to the Executive Yuan.
It remains to be seen if Beijing’s new 26 measures to retain Taiwanese businesses and professionals will be incentives to make them stay.
The Chinese State Council’s Taiwan Affairs Office announced earlier this week more measures to open its markets to Taiwanese firms, to allow Taiwanese companies to invest or participate in projects ranging from 5G, civil aviation to theme parks, and allow them to issue bonds to raise capital.
The list of 26 new measures also include giving Taiwanese the right to seek consular protection from Chinese embassies and consulates in a third country.
In response, Taiwanese authorities say the new host of measures are indeed part of Beijing’s efforts to mitigate the exodus of Taiwanese and foreign investors from the country.
Taiwanese firms like Foxconn, TSMC and Formosa Plastics Group are shutting their plants in China and shifting operations to Taiwan, Southeast Asian or South Asian nations, piling pressure on China, especially on its tech and chemical sectors. The new measures are seen as an attempt to counteract the outflow.
“China is trying to rationalize its bullying of Taiwan on the world stage, while trying to convince Taiwanese people and businesses that it is showing them benevolence and it is still ideal for them to go to China,” said a statement issued by Taiwan’s Mainland Affairs Council.