On Wednesday, central bank Governor Perng Fai-nan (彭淮南) met ranking officials from three state-run banks and asked them to pay attention to the ability of borrowers to repay loans, not just admire the value of the collateral.
The central bank’s unusual move came just three weeks after it issued a press statement voicing concerns that an inflow of hot money would have adverse implications for the nation’s economic and financial stability.
It also came after the central bank increased sales of negotiable certificates of deposit and certificates of deposit to drain excess funds from the money market.
While the central bank declined to comment on whether the housing market is overheating, the perception in financial circles is that the central bank is using open-market operations to fend off a potential property bubble.
Coincidently, the Council for Economic Planning and Development last week invited academics to discuss ways of curbing the rise in house prices. Elsewhere, several government officials have expressed concern over the worsening problem of housing unaffordability.
An asset bubble is doomed to take place in Taiwan, as well as in other economies, after interest rates were cut over the past year to support slowing economies amid the global financial crisis. With interest rates so low, financial regulators now face a surging capital inflow and rising asset prices.
In recent weeks, governments including Singapore, Hong Kong, South Korea and India have adopted measures to prevent their domestic property markets from presenting bubble symptoms.
Experience suggests, however, that the limits of those measures will soon be reached, and that interest rate hikes will be the next step. A key question for central banks is how quickly they should act.
One concern is that raising rates too early might stall economic recovery in those Asian economies where signs of sustainable growth are yet to emerge.
Another concern is that, as risk appetite begins to build in Asia along with the rebounding economy, a quick rate hike would likely boost the so-called “carry trade” — in which investors borrow from countries with ultra-low interest rates and invest in countries with higher rates — thus aggravating what we have already seen in Asia with price surges in equities, real estate and other assets.
In its latest economic outlook for Asia released on Thursday, the IMF said that striking a balance between growth and inflation would be one of the three major policy challenges for Asian economies this year and next year.
Even so, the problem of excess funds in the money market is the most compelling issue for Asian economies, including Taiwan, at this time.
Rather than use credit-tightening measures to quietly discourage speculative financial transactions, governments might consider whether directing surplus capital into sectors that can generate real production — as opposed to financial investment in equities, real estate and commodities — is a wiser approach.
When US budget carrier Southwest Airlines last week announced a new partnership with China Airlines, Southwest’s social media were filled with comments from travelers excited by the new opportunity to visit China. Of course, China Airlines is not based in China, but in Taiwan, and the new partnership connects Taiwan Taoyuan International Airport with 30 cities across the US. At a time when China is increasing efforts on all fronts to falsely label Taiwan as “China” in all arenas, Taiwan does itself no favors by having its flagship carrier named China Airlines. The Ministry of Foreign Affairs is eager to jump at
Denmark has consistently defended Greenland in light of US President Donald Trump’s interests and has provided unwavering support to Ukraine during its war with Russia. Denmark can be proud of its clear support for peoples’ democratic right to determine their own future. However, this democratic ideal completely falls apart when it comes to Taiwan — and it raises important questions about Denmark’s commitment to supporting democracies. Taiwan lives under daily military threats from China, which seeks to take over Taiwan, by force if necessary — an annexation that only a very small minority in Taiwan supports. Denmark has given China a
In China, competition is fierce, and in many cases suppliers do not get paid on time. Rather than improving, the situation appears to be deteriorating. BYD Co, the world’s largest electric vehicle manufacturer by production volume, has gained notoriety for its harsh treatment of suppliers, raising concerns about the long-term sustainability. The case also highlights the decline of China’s business environment, and the growing risk of a cascading wave of corporate failures. BYD generally does not follow China’s Negotiable Instruments Law when settling payments with suppliers. Instead the company has created its own proprietary supply chain finance system called the “D-chain,” through which
Speaking at the Copenhagen Democracy Summit on May 13, former president Tsai Ing-wen (蔡英文) said that democracies must remain united and that “Taiwan’s security is essential to regional stability and to defending democratic values amid mounting authoritarianism.” Earlier that day, Tsai had met with a group of Danish parliamentarians led by Danish Parliament Speaker Pia Kjaersgaard, who has visited Taiwan many times, most recently in November last year, when she met with President William Lai (賴清德) at the Presidential Office. Kjaersgaard had told Lai: “I can assure you that ... you can count on us. You can count on our support
RSS