There is a growing tide of capital flowing to Taiwan this year as people seek safer investments and better opportunities.
Government statistics show that since the beginning of the year, funds have continued to flow back, especially after the six-day Lunar New Year holiday, and hot money is being parked in the local equity and real-estate markets. This probably explains why the TAIEX has risen 5.69 percent so far this year, with daily average turnover on the Taiwan Stock Exchange reaching NT$86.91 billion (US$2.81 billion), compared with the daily average of NT$77.52 billion for the whole of last year.
Some pundits attribute the capital inflow to continued money repatriation by China-bound Taiwanese businesses amid a crackdown by Chinese authorities on foreign investors, while others contend that the inflow reflects the recent appreciation in the New Taiwan dollar and investors’ confidence in the nation’s economic fundamentals.
So far this year, the NT dollar has strengthened by nearly 5 percent against the US dollar, while the Directorate-General of Budget, Accounting and Statistics (DGBAS) on Wednesday revised upward its forecast of the nation’s GDP growth for this year to 1.92 percent from the 1.87 percent estimate made in November last year.
Now an important question is: How long will the high tide last?
There is no quick answer to this question, but one certainty is that the tide will subside soon after the US Federal Reserve raises interest rates again.
There is also uncertainty about a more hostile trade policy from US President Donald Trump’s government, which could affect Taiwan’s exports and increase the volatility of the NT dollar exchange rate.
Another question is: How does the country seek to benefit from the flow of hot money?
The answer depends on whether Taiwan’s investment environment has improved so that China-based Taiwanese businesses and foreign corporations will find the local market more attractive. It also hinges on if the government’s tax reform can create a competitive taxation environment here.
The fact is that Taiwan’s private investment has been lukewarm despite increased exports picking up the slack. This raises downside risks to growth.
Private investment includes all final purchases of machinery, equipment and tools by businesses, plus changes in inventories. There is empirical evidence of a positive correlation between private investment and real GDP.
While private investment has continued to grow, a closer look into government data indicates that it was largely due to real-estate construction, not the expansion of manufacturing facilities.
Last week, the DGBAS cut its private investment growth forecast to 1.85 percent from 2 percent for this year, the lowest in five years. Since funding for construction-related investments is particularly sensitive to interest rates, and financial conditions appear to show a tendency for further tightening, the slowing growth in private investment could persist if there is no substantial change in this type of investment.
Given that liquidity in the domestic banking system is ample and borrowing costs remain low, the government has the responsibility of guiding private funds into production in the real economy, while bringing speculative activities under control.
Even though the government is determined to push its “new southbound policy,” it is also time to bring Taiwanese investments back to the country and to revitalize the local manufacturing industry.
As government tax revenue has contributed little to promoting public investment in recent years, private investment matters. What matters more is how the government has worked to nurture an environment in which companies are willing to invest and offer high wages and can stay profitable.
Burger King Taiwan on Wednesday last week posted an update on Facebook advertising a new “Wuhan pneumonia” (武漢肺炎) home delivery meal, catering to customers hankering for a Whopper, but who wished to avoid visiting one of its outlets. “Wuhan pneumonia” is the term commonly used in Taiwan to describe COVID-19. Beijing has been waging an extensive propaganda campaign against the use of the words “Wuhan” or “China” in reference to the novel coronavirus, calling it racist and discriminatory. Meanwhile, Chinese officials have claimed that the coronavirus might have originated in the US. The intention is obvious: to distract attention from the Chinese Communist
Chinese People’s Liberation Army (PLA) Air Force Shaanxi KJ-500 airborne early-warning aircraft and Shenyang J-11 fighters on March 16 conducted a nighttime exercise in the waters southwest of Taiwan and, in doing so, came close to the nation’s air defense identification zone. Three days later, the PLA Navy’s fleet for Gulf of Aden escort mission sailed north in the Pacific off Taiwan’s east coast via the Miyako Strait on its way home. Meanwhile, the US carried out freedom of navigation operations in the South China Sea and assembled the USS Theodore Roosevelt carrier strike group with the Expeditionary Strike Group to conduct
Having returned to the UK late last year and with a Taiwanese spouse remaining in Taiwan, I have been afforded the chance to compare and contrast the UK and Taiwanese governments’ responses to the COVID-19 crisis. My early conclusions are that Taiwan benefits from a rational, competent government, which quickly recognizes, adapts to and confronts large-scale disasters. It is led by a government that does more than just talk of respecting democracy and human rights, one that is scrutinized and responds to criticism, one that is concerned about public opinion, and one that is used to dealing with emergencies on
Italy, Spain, France, the UK and the US are all depending on social distancing to fight COVID-19 and have fallen into terrible situations, with mounting positive cases and many deaths. Social distancing might flatten the curve, so that the peak is not so high that hospitals are overwhelmed with patients, the problem is that the pandemic could extend further into the future, hurt the economy more and become unbearable for society. Taiwan, South Korea, Japan and Singapore have controlled the spread of COVID-19, and the main reason is that most Asians wear masks. It can be illustrated as follows: If someone contracts the