The nation’s financial account, which includes direct and portfolio investments, registered a net outflow of US$12.64 billion in the second quarter of the year — for the 32nd consecutive quarter — bringing the aggregate net outflow to US$380.42 billion at the end of June.
The phenomenon is not unusual, because capital outflows are common in countries with trade surpluses and where financial institutions, especially life insurance companies, seek investment opportunities abroad, the central bank said.
As long as Taiwan lacks the necessary investment tools and local companies must acquire critical technology or strategic resources abroad, capital outflows would persist, the bank said.
However, outflows are not bad, because their absence would place appreciation pressure on the New Taiwan dollar, while overseas investments help ease excess savings in Taiwan and boost the nation’s economy, central bank Governor Yang Chin-long (楊金龍) said at a rare news conference on Wednesday last week.
There is nothing new about having financial account deficits in Taiwan. Each time the central bank releases its quarterly balance-of-payments report, along with current account, financial account and reserve asset statistics, the problem of capital outflows is something that hits the headlines on an otherwise boring day.
However, Wednesday’s unscheduled and unprecedented news conference was streamed live on the central bank Web site, raising speculation about the move.
Yang’s comments came days after an Aug. 21 article in the Chinese-language China Times reported that Taiwan’s financial account deficit had totaled US$124.91 billion for the two years after President Tsai Ing-wen (蔡英文) took office.
The amount was considerably higher than during former presidents Ma Ying-jeou’s (馬英九) and Chen Shui-bian’s (陳水扁) first two years in office, the newspaper said, suggesting that the domestic investment environment under Tsai’s administration is rapidly worsening and approaching collapse.
In the run-up to the November elections, the China Times article has naturally become a hot topic of discussion on TV talk shows.
The article rightly pointed out the issue of persistent capital outflows in Taiwan, but failed to say that the net outflow of US$12.64 billion in its financial account last quarter was the lowest since Tsai took office.
The article did not say that the financial account surplus of US$18.53 billion during Ma’s first two years in office was mainly due to his cutting the estate and gift tax rates from a maximum of 50 percent to a flat 10 percent. That move produced years of net outflows and the total financial account deficit for Ma’s eight years in office was US$254.49 billion.
The China Times did not shed any light on why Ma’s total was substantially higher than Chen’s total deficit of US$34.42 billion for his two terms in office.
Yang told reporters that he was not under political pressure to hold the news conference, but that he had wanted to clear up myths about outflows.
Excess savings — gross domestic savings minus gross domestic investment — are one contributor to higher capital outflows, and underline the problem of effective demand in the economy, he said.
Even though the government has tried to improve the domestic investment environment, wealthy Taiwanese and life insurance companies still prefer to invest abroad, and Taiwan has difficulty increasing domestic investment and attracting foreign direct investment.
From the central bank’s perspective, financial account deficits and current account surpluses are just figures in its quarterly balance-of-payments report, but from the economy’s perspective, weak domestic demand and investment have caused Taiwan to underperform its regional peers over the past few years.
A series of strong earthquakes in Hualien County not only caused severe damage in Taiwan, but also revealed that China’s power has permeated everywhere. A Taiwanese woman posted on the Internet that she found clips of the earthquake — which were recorded by the security camera in her home — on the Chinese social media platform Xiaohongshu. It is spine-chilling that the problem might be because the security camera was manufactured in China. China has widely collected information, infringed upon public privacy and raised information security threats through various social media platforms, as well as telecommunication and security equipment. Several former TikTok employees revealed
For the incoming Administration of President-elect William Lai (賴清德), successfully deterring a Chinese Communist Party (CCP) attack or invasion of democratic Taiwan over his four-year term would be a clear victory. But it could also be a curse, because during those four years the CCP’s People’s Liberation Army (PLA) will grow far stronger. As such, increased vigilance in Washington and Taipei will be needed to ensure that already multiplying CCP threat trends don’t overwhelm Taiwan, the United States, and their democratic allies. One CCP attempt to overwhelm was announced on April 19, 2024, namely that the PLA had erred in combining major missions
At the same time as more than 30 military aircraft were detected near Taiwan — one of the highest daily incursions this year — with some flying as close as 37 nautical miles (69kms) from the northern city of Keelung, China announced a limited and selected relaxation of restrictions on Taiwanese agricultural exports and tourism, upon receiving a Chinese Nationalist Party (KMT) delegation led by KMT legislative caucus whip Fu Kun-chi (傅崑萁). This demonstrates the two-faced gimmick of China’s “united front” strategy. Despite the strongest earthquake to hit the nation in 25 years striking Hualien on April 3, which caused
The Constitutional Court on Tuesday last week held a debate over the constitutionality of the death penalty. The issue of the retention or abolition of the death penalty often involves the conceptual aspects of social values and even religious philosophies. As it is written in The Federalist Papers by Alexander Hamilton, James Madison and John Jay, the government’s policy is often a choice between the lesser of two evils or the greater of two goods, and it is impossible to be perfect. Today’s controversy over the retention or abolition of the death penalty can be viewed in the same way. UNACCEPTABLE Viewing the