China is to release its annual GDP figures today, with a poll of economists conducted by Agence France-Presse (AFP) suggesting that the country’s economy likely grew at 6.6 percent, its slowest pace in almost three decades.
Headwinds from trade tensions with the US, as well as financial deleveraging and the curbing of property speculation in the domestic market, slowed GDP growth in China to 6.5 percent in the third quarter of last year, compared with 6.7 percent in the second quarter and 6.8 percent in the first quarter. According to the AFP poll, the fourth quarter is likely to grow 6.4 percent from a year earlier, making it the slowest quarter since early 2009.
The People’s Bank of China last month announced that it would lower its reserve requirement ratio for the fifth time in a year to inject liquidity into the Chinese economy. The move is the first of several easing steps that Beijing is expected to take this year to support its economy and it underpins the general view that China has growing concerns about the worsening outlook.
Experts have warned of a difficult year ahead and Taiwan must pay close attention to the Chinese economic slowdown. China remains Taiwan’s largest trading partner, accounting for 40 percent of total exports.
A key area to watch is the credit risk of Taiwanese banks’ loan exposure to China. Central bank data released last month showed that China remains the nation’s second-largest debtor after the US. On a direct-risk basis, loans extended by Taiwanese banks to China totaled US$44.32 billion as of the end of September and the number could reach US$69.2 billion on an ultimate-risk basis.
Over the past few years, Beijing has used deleveraging to tackle growing debt and financial risk, but due to interest rate hikes by the US Federal Reserve and a weakening yuan that is prompting capital outflows, China’s policymakers have eased their stance and encouraged banks to extend more loans to fight the risk of a sharper slowdown.
Some Chinese cities have implemented wider easing measures and more debt issuances over the past few months to counter faltering property markets and infrastructure development, which could increase risks to its financial system — Taiwanese banks must take necessary precautions.
The effect of the US-China trade dispute on Taiwan also requires watchfulness. Although the US and China agreed to a three-month truce, the economic uncertainties set in motion by the lingering spat are likely to continue to dampen sentiment in the global market and hinder business investment before a resolution can be reached on March 1.
While the slowdown in the US and Chinese economies due to the trade spat is likely to have a negative effect on Taiwan’s export-reliant economy, the repatriation of Taiwanese companies to circumvent high tariffs could benefit the nation’s economy.
Any concessions that China is likely to make in an attempt to mend its trade relationship with the US, including adjustments to its “Made in China 2025” plan and government subsidies, could provide a boost to Taiwanese industries seeking a level playing field with their Chinese peers.
The crucial thing to watch is whether China — after celebrating 40 years of reform and the opening up of its market last month — changes its model of economic development. In the past few years, business in China has seen growing dependence on the state sector, rather than on the private sector. Beijing could be fine-tuning its agenda — developing a semi-market economy with Chinese characteristics.
Whether Beijing is planning such changes is shrouded within the complex headwinds of trade tensions and the private workings of the Chinese Communist Party, but any efforts toward new reforms and market opening — should they happen — would certainly affect the global economy, including Taiwan.
Could Asia be on the verge of a new wave of nuclear proliferation? A look back at the early history of the North Atlantic Treaty Organization (NATO), which recently celebrated its 75th anniversary, illuminates some reasons for concern in the Indo-Pacific today. US Secretary of Defense Lloyd Austin recently described NATO as “the most powerful and successful alliance in history,” but the organization’s early years were not without challenges. At its inception, the signing of the North Atlantic Treaty marked a sea change in American strategic thinking. The United States had been intent on withdrawing from Europe in the years following
My wife and I spent the week in the interior of Taiwan where Shuyuan spent her childhood. In that town there is a street that functions as an open farmer’s market. Walk along that street, as Shuyuan did yesterday, and it is next to impossible to come home empty-handed. Some mangoes that looked vaguely like others we had seen around here ended up on our table. Shuyuan told how she had bought them from a little old farmer woman from the countryside who said the mangoes were from a very old tree she had on her property. The big surprise
The issue of China’s overcapacity has drawn greater global attention recently, with US Secretary of the Treasury Janet Yellen urging Beijing to address its excess production in key industries during her visit to China last week. Meanwhile in Brussels, European Commission President Ursula von der Leyen last week said that Europe must have a tough talk with China on its perceived overcapacity and unfair trade practices. The remarks by Yellen and Von der Leyen come as China’s economy is undergoing a painful transition. Beijing is trying to steer the world’s second-largest economy out of a COVID-19 slump, the property crisis and
As former president Ma Ying-jeou (馬英九) wrapped up his visit to the People’s Republic of China, he received his share of attention. Certainly, the trip must be seen within the full context of Ma’s life, that is, his eight-year presidency, the Sunflower movement and his failed Economic Cooperation Framework Agreement, as well as his eight years as Taipei mayor with its posturing, accusations of money laundering, and ups and downs. Through all that, basic questions stand out: “What drives Ma? What is his end game?” Having observed and commented on Ma for decades, it is all ironically reminiscent of former US president Harry