Exodus hurting economy

Chunghwa Picture Tubes Ltd (中華映管) is part of the exodus that has pushed the nation into its worst recession on record.

"We cut the size of our Taiwan workforce when we moved some of our production to China," said Tony Chien, a spokesman at Chunghwa, a Taiwan-based maker of tubes and flat-panel displays for computer monitors. Chunghwa, which had a NT$3.8 billion (US$108 million) loss in the first nine months of last year, fired 350 workers in November.

As Chunghwa and other manufacturers move business to China to cut costs and reach the world's biggest consumer market, jobs and investment are drying up. That, along with tumbling world demand for computers and electronics, is sapping the nation's economic growth.

Fourth-quarter gross domestic product probably shrank 2.7 percent from a year earlier, according to the median forecast of 15 economists in a Bloomberg News survey -- the third straight decline.

For last year, GDP probably fell 2.2 percent, the first full-year contraction since the government started keeping records in 1952.

The government will report fourth-quarter and 2001 GDP figures tomorrow.

While a rebound in electronics exports will probably pull the nation out of recession this year, the economy may never return to the 6 percent growth rates seen in the 1990s as stiffening competition from China cripples the domestic economy.

Manufacturers' moves to China helped push the unemployment rate to a record 5.4 percent in December from 3.5 percent at the beginning of last year, and the shift may accelerate in coming months as both governments lower investment barriers after joining the WTO.

"Taiwan's turning into an economic province of China," said Paul Alapat, an economist at Nomura International (Hong Kong) Ltd. "The hollowing out of Taiwan will continue."

Overseas investment fell by a third last year to US$5.1 billion, while Taiwanese companies boosted investment in China by 7 percent to US$2.8 billion.

Falling world computer demand and a recession in the US, the nation's biggest export market, haven't helped. Exports, which make up about half the economy, fell 17.1 percent last year, the biggest drop on record, an earlier report showed. That slashed earnings at companies such as United Microelectronics Corp (聯電) and Nanya Technology Corp (南亞) and forced them to put expansion plans on hold.

Nanya, the nation's largest computer memory-chip maker by market value, last year postponed plans to raise money to build a new semiconductor plant as it turned to a loss because of falling computer demand and an oversupply of chips.

Global semiconductor sales slumped by a third last year to US$152 billion, the biggest decline on record, according to Dataquest.