Sat, Dec 06, 2003 - Page 10 News List

Diversification beyond China imperative: TIER

EMBARGO THREAT As 24.3 percent of the nation's exports are destined for China, businesspeople ought to ensure that their eggs are not all in one basket


Despite increased trade across the Taiwan Strait, Taiwanese busi-nesses should be cautious about the risks derived from their growing dependence on the Chinese market, a researcher said in a report released on Thursday.

The report, conducted by the Taiwan Institute of Economic Research (台經院) and commissioned by the Industrial Development Bureau, said there will be a substantial impact on Taiwanese manufacturers if the Chinese authorities boycott imports.

Taiwan's export sector has become increasingly dependent on the Chinese market, with 24.3 percent of the nation's total exports heading to China during the first nine months of the year, according to the latest tallies from the Directorate General of Budget, Accounting and Statistics.

The figure has increased over those of the previous two years, the agency said. Last year, 29.1 percent of exports went to China, and the figure was 19.6 percent in 2001.

The index of economic impact -- which the institute uses to indicate the decline in shipments from Taiwan to China in the event of a trade embargo by Beijing -- reached 13.3 percent last year, up from 12.1 percent the previous year, the report said.

"I think the index will rise further this year, because local industries still heavily depend on the Chinese market," Tsai Yu-fang (蔡毓芳), the author of the report, said yesterday.

According to statistics from the Ministry of Economic Affairs, for the first nine months of the year, Taiwan exported US$35 billion of goods to China, which accounts for 33.9 percent of total exports, and also makes the destination Taiwan's largest export destination.

China became the nation's largest export market late last year.

"Although under the WTO's rules the Chinese government is not likely to embargo imports from Taiwan, the sector still needs to be aware of the latent risk due to the instability of cross-strait relations," Tsai said. "Taiwanese businesspeople should disperse their investments to other countries to reduce risk."

Among the various industries, precision machine manufacturing, metal industries, chemical material manufacturing and mechanical equipment manufacturing should especially keep an eye open for potential risk, as their dependency on China is 34.3 percent, 30.2 percent, 28.8 percent and 22.1 percent, respectively, the report said.

The report also warned that made-in-China products may pose a threat to Taiwanese goods, as China's industrial structure has rapidly upgraded from traditional industries to high-tech industries such as semiconductor manufacturing, information technology and electronic device production. Taiwan has been one of the world's leaders in these industries.

"When Taiwanese businesspeople are busy moving their factories to China, they should also preserve some core techniques here," Tsai said. "Think of Japan, the country always keeps its technology one or two years ahead of other countries."

The institute is not alone in issuing the warning toward China-bound Taiwanese businesses. The Ministry of Economic Affairs on Thursday issued a report saying that Taiwanese firms must watch out for several crises that might occur in China later, despite the country's strong economic growth.

The report said China is facing stringent structural imbalance in finance, banking, regional development and its job market, which will result in inadequate investment in infrastructure and mounting debt.

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