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Economists see GDP grow 3 percent

Taiwan's economic growth rate probably tripled in the second quarter as makers of mobile phones and other electronics manufactured and sold more goods in China.

GDP probably expanded 3 percent in the April-to-June period from a year earlier, according to economists. That compares with a 0.89 percent pace in the first quarter, the first increase after a three-quarter contraction.

Growing economic links with China fueled second-quarter growth as manufacturers cut costs by moving production across the strait and sold more goods to Chinese customers. Those links may become more important in coming months as faltering US demand prompts electronics makers to slash sales targets.

"In Taiwan, whether you're in the personal computer, consumer-electronics or telecommunications industry, China will become the main market," said Dennis Liu, manager at Elan Microelectronics Corp (義隆電子), which makes chips for cordless phones. "Our business in China will help reduce some of the impact of a weakening US economy."

The government will report second-quarter GDP at 5:30pm today and may revise its 2.55 percent growth target for all of this year. Economists surveyed expect a 3.2 percent expansion this year.

China's economic importance to Taiwan is growing even as the two governments remain politically deadlocked. China surpassed the US as Taiwan's biggest export destination in the fourth quarter last year, accounting for about a quarter of shipments.

Companies such as mobile-phone maker BenQ Corp (明基電通) are opening factories in China as curbs on investment are relaxed, allowing them to sell more cheaply to overseas customers. Others are tapping into China's domestic market, where the economy grew 8 percent last quarter.

That's keeping Taiwan growth on course as US demand stalls.

Growth in the world's largest economy slowed to a 1.1 percent annual pace in the second quarter from 5 percent in the first quarter, and the US Federal Reserve said earlier this week it sees risks of a further slowdown.

Taiwan-based companies increased investment in China by 34 percent in the second quarter from a year earlier, according to government figures.

Exports, which make up half of Taiwan's GDP, are keeping growth on course.

Still, manufacturers moving to China is hurting the domestic economy, draining jobs and damping consumer spending.
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