Whether or not Taiwan is facing a looming financial crisis has become a hot issue following a recent article in The Economist on trouble in the banking sector.
Current and former finance officials yesterday continued to offer a range of interpretations on the issue.
Minister of Finance Yen Ching-chang (
"The catalyst for creating a financial crisis has been mostly concentrated in the overdue loan problem," Yen said. "On the whole, the overdue loan ratio in Taiwan is 6.23 percent. Minus the credit cooperatives, the ratio stands at only 5.36 percent.
"Based on international standards, such a ratio is extremely safe and should not trigger a financial crisis. An overdue loan ratio of at least 15 percent would be needed to trigger a financial crisis.
Cheng-chi University banking professor Norman Yin (
Yen said that Taiwan does not fit the criteria for a financial crisis. Japan's economic situation is somewhat closer to Taiwan's, and the cause for Japan's recent financial crisis was economic stagnation. In recent years, Japan's economic growth rate has been almost zero. But Taiwan has maintained an average economic growth rate of 6 percent.
Former finance minister Paul Chiu (邱正雄) disagreed, saying if a global recession kicks in, Taiwan could experience a financial crisis.
"After the new administration took over, Taiwan's economy as a whole began deteriorating. The symptoms include falling stock prices, rising overdue bank loans and capital outflows," Chiu said.
"Economic indicators this year show record export growth, high economic growth and high foreign exchange reserves. There is no immediate danger of a financial crisis.
Vice Governor of the Central Bank of China Chen Shih-meng (
"Taiwan industry is now heavily concentrated in electronics and is unable to fight against volatility in the international market.
"Also, the construction and other traditional industries are now performing poorly, and many companies have moved their operations to China.
"In addition, China has become a black hole for Taiwan's resources, absorbing massive amounts of capital from Taiwan, Chen said.
"A crisis in our domestic industrial sector would most likely precede a financial crisis. Nevertheless, export orders have remained stable.
"But if the Chen administration abandons the current `don't hurry, be patient' policy, it could trigger a crisis in the industrial sector," Chen said.
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