So many times over the past few years the government has called on Taiwanese businesspeople to diversify their overseas markets and not place all of their bets on China. Its warnings, however, have failed to dim the sirens' songs of riches to be found in China, which still absorbs nearly 38 percent of Taiwan's exports and accounted for almost 71 percent of the nation's outbound investment last year.
It's not easy to ask businesspeople to diversify their markets overnight. However, the issue has become more important than ever. The government's National Security Report released on Saturday explicitly stated that Taiwan's economic security has come under strong pressure from China due to the nation's over-reliance on the Chinese market. The issue is crucial because global markets are changing fast.
Naturally, people would consider countries such as India, Vietnam and other Southeast Asian countries as places they can add into their portfolio to reduce possible risks. But what if these markets were chosen because of their cheaper labor costs and lax regulatory environment? Should they be considered the only destination for Taiwanese investments if the government wants to develop a high value-added knowledge economy at home?
Then there was last week's release of the faster-than-predicted 1.9 percent first quarter growth in Japan. It was that nation's fifth straight quarter of expansion, a reminder that it is heading for its longest post-World War II expansion.
A resilient Japanese economy offers not only a window of hope for our nation's economy to avoid dependence on China, but also heralds the beginning of a new regional economic order that Taiwan needs to pay attention to.
Japan has consumed nearly 20 percent of Taiwan made goods annually and Taiwan welcomed its 1 millionth Japanese tourist last November. Japan is expected to achieve an economic growth rate of 3.2 percent this year, compared to the 2.2 percent that Global Insight, a US forecasting company, previously predicted.
While the Japanese have endured a decade and a half of reduced domestic investment and industry relocation following the substantial revaluation of yen after 1985, their businesses have in recent years begun to increase investments at home and have focused on quality enhancement and technological advancement to develop products to win in the global market.
Along with its economic reform efforts, a sound and recovering Japan represents a much needed partner for Taiwanese industries longing to collaborate in the supply chain to upgrade manufacturing.
Including advanced countries such as Japan, the US and some EU members in Taiwan's investment portfolio could increase returns while reducing risks. Done properly, Taiwan could develop its high value-added knowledge economy here and create an investment portfolio that has even higher returns over the long term. Putting all of the nation's investments in lower-cost countries will only guarantee a persistent search for new markets to survive increased competition.
As long as Taiwan's economy is under threat from China's growing clout and the risk of being marginalized in regional economic blocs, the nation needs to build its investment portfolio around a larger and more diversified market selection. Most importantly, both the government and companies need to carefully choose their markets. They also need to monitor their portfolio proportions regularly and react accordingly.
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