Earlier this month, Chinese President Xi Jinping (習近平) told global business leaders at the APEC CEO summit in Beijing that the risks faced by China’s economy were “not so scary” following a rocky year and that the Chinese government was confident it could head off the dangers.
However, just two weeks later, the People’s Bank of China unexpectedly announced on Friday that it would lower interest rates for the first time in more than two years, after a series of limited-scale stimulus measures Beijing has used since April failed to support growth. The rate cuts took effect yesterday.
China’s move was the latest action in the past three weeks taken by major central banks around the world to tackle the problem of a slowing economy.
Also on Friday, European Central Bank (ECB) President Mario Draghi told the European Banking Congress in Frankfurt that European monetary authorities were ready to roll out new policy measures to ward off deflation in the eurozone without any reservation. Clearly, the ECB is under tremendous pressure to drive inflation back to its target of just below 2 percent from near zero now.
Meanwhile, in Japan, the country’s central bank on Oct. 31 announced plans to deepen its quantitative easing after the economy surprisingly fell into recession in the third quarter. That was followed by Japanese Prime Minister Shinzo Abe’s move last week to dissolve parliament and hold off a controversial plan to further increase the country’s sales tax, as Japanese policymakers were resolved to reinvigorate its faltering growth drive.
The first thought that comes to mind about these concerted actions over the past few weeks by major central banks is that global policymakers are working to encourage domestic economies in the face of weakening growth.
While these central banks’ actions seem to follow the US Federal Reserve’s quantative easing, placing hope on enormous liquidity to support their respective economies, the move also indicates a potential worry ahead about the negative impacts of slow growth amid low inflation, as well as a challenge to push forward reform measures in the face of a slower growth outlook.
Actions by other major monetary authorities may have a limited impact on Taiwan’s central bank, which is likely to leave its interest rates flat at a quarterly board meeting next month for the 14th consecutive quarter. It is believed that Taiwan will only launch a rate-hike cycle after the Fed starts to raise its key interest rates in the middle of next year.
The weakening growth outlooks for China, Japan and Europe do signal an increasing threat for Taiwan’s export-oriented economy, despite signs of steady growth in the US. Therefore, the issue of how Taiwan will make an appropriate response to an increasing divide in the global economy is becoming an imminent one for the nation’s policymakers.
Taiwanese exporters are likely to face a more volatile foreign exchange rate situation and much less friendly overseas markets if the New Taiwan dollar drops further in value, especially if the People’s Bank of China follows up with an action to lower its reserve requirement ratios, which would flood money markets with cheap yuan and trigger more devaluation from other Asian currencies.
Taiwanese firms are already no match for Chinese ones in terms of cost structure and pricing strategy, but they are now facing more competition from their peers in Japan and South Korea. For Governor Perng Fai-nan’s (彭淮南) central bank, NT dollar devaluation may be a bitter pill that Taiwan has to swallow because local exporters are being sandwiched harder than ever, even though it will also hurt domestic consumers’ purchasing power and weaken private consumption.
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
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.
As Maldivian President Mohamed Muizzu’s party won by a landslide in Sunday’s parliamentary election, it is a good time to take another look at recent developments in the Maldivian foreign policy. While Muizzu has been promoting his “Maldives First” policy, the agenda seems to have lost sight of a number of factors. Contemporary Maldivian policy serves as a stark illustration of how a blend of missteps in public posturing, populist agendas and inattentive leadership can lead to diplomatic setbacks and damage a country’s long-term foreign policy priorities. Over the past few months, Maldivian foreign policy has entangled itself in playing
A group of Chinese Nationalist Party (KMT) lawmakers led by the party’s legislative caucus whip Fu Kun-chi (?) are to visit Beijing for four days this week, but some have questioned the timing and purpose of the visit, which demonstrates the KMT caucus’ increasing arrogance. Fu on Wednesday last week confirmed that following an invitation by Beijing, he would lead a group of lawmakers to China from Thursday to Sunday to discuss tourism and agricultural exports, but he refused to say whether they would meet with Chinese officials. That the visit is taking place during the legislative session and in the aftermath