Taiwanese executives were upbeat during their annual shareholder meetings last week about business prospects for the second half of the year, telling shareholders that a pick-up in seasonal demand would boost their businesses.
At the same time, they urged the government to take drastic actions to keep the New Taiwan dollar in check to help them sustain growth amid a looming currency devaluation race in the Asia-Pacific region.
Taiwanese exporters are losing orders to South Korean and Japanese rivals, who are offering lower prices for their often better-quality products, profiting from the depreciation of the won and the yen versus the US dollar. A strong NT dollar is undermining corporate profitability.
Taiwan Semiconductor Manufacturing Co chairman Morris Chang (張忠謀) has been loudest on the foreign exchange issue. He has repeatedly called for devaluation of the NT dollar to help companies fend off growing competition from South Korean firms, Samsung in particular.
Last week, Chang said that the NT dollar has been unfavorable to exporters over the past few years. He said Taiwan would need to take action along the lines of the “three arrows” policy launched by Japanese Prime Minister Shinzo Abe to fix his nation’s economic weakness. Monetary easing and fiscal stimulus are the two arrows that Abe has implemented so far.
As economic recovery in Europe and in the US stumbles, it seems that Taiwanese exporters are looking for any possible way to grow. Their complaints about foreign exchange issues seem convincing, justified by weaker exports figures.
Taiwan’s exports in the first quarter grew only 4.79 percent from a year ago, falling short of the 6.2 percent annual growth forecast by the Directorate-General of Budget, Accounting and Statistics.
Corporations are hoping that the central bank will exert greater influence on the movement of the NT dollar. Some have even proposed pegging the currency to the won, because 80 percent of South Korea’s exports compete with those from Taiwan.
Joining Chang was Gou Tai-chiang (郭台強), chairman of Cheng Uei Precision Industry Co, who told reporters last week that a weak NT dollar would help ease pressure on Taiwanese firms.
“The Japanese government is doing this, why not the Taiwanese government?” Gou said.
Eric Chuo (卓永財), chairman of the nation’s major machinery tool exporter, Hiwin Technologies Corp, said that the recent 30 percent depreciation in the yen versus the greenback undermined Taiwanese companies’ competitiveness because local firms used to undercut their Japanese rivals to secure more orders. To stave off competition from Japan, Chou suggested the government devalue the NT dollar by 10 percent, to about NT$32 per US dollar.
However, foreign exchange rate manipulation is a double-edged sword. Weakness in the NT dollar will come at the cost of reducing consumers’ purchasing power and private consumption as imports become more expensive. Private consumption and imports are also key components of GDP.
The central bank knows this and is keeping to its stance of holding the NT dollar within a flexible, but narrow range. The NT dollar weakened 0.3 percent last week to NT$29.97 against the US dollar after persistent intervention by the central bank.
The central bank is doing its job to safeguard the nation’s economic growth. Are exporters doing all they can to strengthen their competitiveness? It is clear that they have been relying on offering lower-priced products to compete for market share, while forgoing advancements to their technologies and creating more innovative products and services.
These companies need to change their approach.
Recently, China launched another diplomatic offensive against Taiwan, improperly linking its “one China principle” with UN General Assembly Resolution 2758 to constrain Taiwan’s diplomatic space. After Taiwan’s presidential election on Jan. 13, China persuaded Nauru to sever diplomatic ties with Taiwan. Nauru cited Resolution 2758 in its declaration of the diplomatic break. Subsequently, during the WHO Executive Board meeting that month, Beijing rallied countries including Venezuela, Zimbabwe, Belarus, Egypt, Nicaragua, Sri Lanka, Laos, Russia, Syria and Pakistan to reiterate the “one China principle” in their statements, and assert that “Resolution 2758 has settled the status of Taiwan” to hinder Taiwan’s
Singaporean Prime Minister Lee Hsien Loong’s (李顯龍) decision to step down after 19 years and hand power to his deputy, Lawrence Wong (黃循財), on May 15 was expected — though, perhaps, not so soon. Most political analysts had been eyeing an end-of-year handover, to ensure more time for Wong to study and shadow the role, ahead of general elections that must be called by November next year. Wong — who is currently both deputy prime minister and minister of finance — would need a combination of fresh ideas, wisdom and experience as he writes the nation’s next chapter. The world that
The past few months have seen tremendous strides in India’s journey to develop a vibrant semiconductor and electronics ecosystem. The nation’s established prowess in information technology (IT) has earned it much-needed revenue and prestige across the globe. Now, through the convergence of engineering talent, supportive government policies, an expanding market and technologically adaptive entrepreneurship, India is striving to become part of global electronics and semiconductor supply chains. Indian Prime Minister Narendra Modi’s Vision of “Make in India” and “Design in India” has been the guiding force behind the government’s incentive schemes that span skilling, design, fabrication, assembly, testing and packaging, and
Can US dialogue and cooperation with the communist dictatorship in Beijing help avert a Taiwan Strait crisis? Or is US President Joe Biden playing into Chinese President Xi Jinping’s (習近平) hands? With America preoccupied with the wars in Europe and the Middle East, Biden is seeking better relations with Xi’s regime. The goal is to responsibly manage US-China competition and prevent unintended conflict, thereby hoping to create greater space for the two countries to work together in areas where their interests align. The existing wars have already stretched US military resources thin, and the last thing Biden wants is yet another war.