A slowdown in China’s GDP growth to below 7 percent will not significantly weaken the creditworthiness of Taiwanese companies, but falling demand could increase price competition, Taiwan Ratings Corp (中華信評) said yesterday.
The deceleration in China’s economic growth over the past two years has led to overcapacity and intensified competition in many manufacturing segments. The automobile, steel, cement and chemicals sectors may come under more pricing pressures, the local arm of Standard & Poor’s said.
Taiwan Ratings expects China’s GDP growth to slow further next year, which could increase margin pressures for Taiwanese businesses that depend on China as their main destination for exports.
“Slower growth in China poses a real risk to corporate revenues, but the credit impact on Taiwanese companies is likely low, meaning a two-notch downgrade at most,” Taiwan Ratings credit analyst Raymond Hsu (許智清) said.
“That is because Taiwanese firms maintain strong capitalization and cash flow to absorb the impact of an economic adjustment,” he said.
“Sufficient liquidity in Taiwan’s financial market and low interest rates provide additional flexibility for the companies to counter business volatility in China over the next one or two years,” Hsu said.
China’s recent actions to stimulate domestic consumption could lift demand somewhat, but may not quickly restore major manufacturing sectors, he said.
The benefits from the cross-strait services pact may not be seen in time to offset the negative impact from an economic slowdown in China, he added.
Separately, Taiwan’s thin profit margins and intense competition may drive more local financial institutions to expand in China, but the pace of growth is likely slow, with limited profit contribution and manageable risks in the next few years, Taiwan Ratings said.
“Most financial service sectors in Taiwan will remain active in pursuing new business opportunities in China over the next two or three years, despite the different speed of deregulation in each service sector,” credit analyst Eunice Fan (范維華) said.
Relaxing political and trade barriers across the Taiwan Strait have facilitated this trend and the migration of many corporate clients into China has also lent a helping hand, she said.
However, local financial institutions maintain a prudent growth approach with manageable risk in China and should prevent an aggressive shift in risk profiles in the medium term, she added.
Taiwan Ratings expects financial institutions’ exposure in China to have a neutral rating impact over the next two or three years.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day