It might not be creative, but it was definitely a safe move when President Ma Ying-jeou (馬英九) picked financial veteran and Vice Premier Sean Chen (陳冲) as the new premier in his second presidential term to help combat potential economic setbacks as uncertainty surrounding the global economy — the eurozone debt crisis in particular — poses a threat to the nation’s GDP growth this year.
Taiwan’s GDP is expected to grow at a slower pace of 3.91 percent this year as exports are expected to fall into a downward spiral as demand from developed countries for locally made electronics shrinks. This would happen in debt-ridden European countries in particular, which have been Taiwanese manufacturers’ third-largest export destination, the government’s statistics agency said yesterday.
Last year, Taiwan’s economy grew at an annual rate of 4.03 percent.
Amid the precarious macroeconomic environment, investors usually look to political and financial stability to counter the mounting risks of asset losses as Taiwan, an export-oriented economy, is vulnerable to global economic changes. No significant changes in government polices are desired at this pivotal moment.
“It is wise to just fine-tune the Cabinet at this critical moment,” Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) director Steven Yang (楊家彥) said by telephone. “The top priority for the government is to be prepared to fight any adverse effects from the deteriorating European debt problem.”
Chen, 62, stands out as a suitable choice to help Ma steer the nation’s economy through this perilous period, as “he has helped Taiwan weather the 2008-2009 global financial crisis and the government now needs him to tackle any problems arising from any ripple effects if the European debt crisis deteriorates,” Yang said.
Chen also picked proven economic and financial experts to help him, based on their abilities to manage crises. Former minister without portfolio Yiin Chii-ming (尹啟銘) was tapped as new Council for Economic Planning and Development minister, while incumbent Minister of Economic Affairs Shih Yen-shiang (施顏祥) stayed in his position in the latest Cabinet reshuffle.
Chen was the mastermind behind a scheme to help local banks, corporations and labor unions obtain sufficient capital after US investment bank Lehman Brothers collapsed because of liquidity problems. Chen was chairman of the Financial Supervisory Commission at the time.
During his tenure as vice premier, Chen built strong trust among the public. Under his supervision, the TAIEX returned to a level above its 10-year average of 6,743 points after the National Stabilization Fund was activated to bolster local share prices. That earned Chen the title of “defensive linesman of the 10-year average level.”
The TAIEX dropped to below the 10-year average, to 6,633, on Dec. 19 last year, after investors’ confidence was shattered on fears that debt problems spreading through the 17-member European economic bloc could hit local exporters badly.
On Monday, “stock investors cast a vote of confidence in Chen, as reflected in a spike in turnover,” a stock market analyst surnamed Chen said by telephone. He declined to reveal his full name.
In the first trading day after the Lunar New Year break, daily turnover bounced back to NT$140.51 billion, which has not been seen for about three months, according to Taiwan Stock Exchange statistics. Turnover expanded yesterday to NT$160.54 billion.