Academia Sinica yesterday called on the central bank to adjust its longstanding policy of keeping interest rates low and local currency exchange rates weak, which has contributed to national economic stagnation and excessive liquidity.
The Taipei-based research body made the appeal at a news conference after releasing recommendations on how the monetary policymaker can enhance stabilization of Taiwan’s currency market and banking institutions.
“Taiwan’s economic and financial development shows stagnation and suggests significant need for reform,” the report said.
Photo: Huang Tzu-hsun, Taipei Times
The central bank in the past year has met its goal of stabilizing the local currency and financial system, but has ignored enhancing liquidity and the economy, it said.
The central bank has favored policies focusing on low interest rates and a weak New Taiwan dollar, which has been responsible for excessive liquidity, property price hikes, stagnant wages and weak banking institutions, it said.
Low capital utilization hinders the development of the financial industry, which leads to slow industrial transformation, soft economic growth and stagnant wages, it added.
The bank’s policy stance also misses opportunities for wealth creation through better use of foreign exchange reserves, the report said.
The central bank should be more transparent in its interventions in the foreign exchange market, and lend support to the creation of a sovereign wealth fund using foreign exchange reserves, it said.
The monetary policymaker should also cease profiting from the currency market, leaving currency profit activities to wealth management experts, as is the case in other countries, the report said.
The central bank should follow the US Federal Reserve in offering forward-looking guidance on inflation and interest rates to help people and corporations prepare for their impacts, it said.
“The government should rethink the status of the central bank and not treat it like a state-run enterprise,” said Li Yi-ting (李怡庭), an academician at Academia Sinica and a member of the central bank’s policy board.
“This would reduce pressure to supplement the national treasury from its operational earnings. It would require collaboration on fiscal, governmental and legislative levels to increase the central bank’s independence,” she said.
Academia Sinica’s non-binding recommendations carry weight with the government given the institution’s influence, and the report marks the first time it has weighed in so publicly on central bank reform.
The central bank issued a response later in the day, saying it has guided its policy decisions in line with the nation’s needs, which differ from those in large economies.
A stable local currency is better for a small and open economy such as Taiwan’s, whereas other economies have different needs, the bank said.
The bank denied that a lack of independence in its operations or the need to profit from the currency market, saying that supply and demand decides the value of the New Taiwan dollar.
The bank said it is not against the creation of a sovereign wealth fund, but there should be a legal foundation first and then the government can plan its budget and funding sources.
Additional reporting by Bloomberg
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last
US CONSCULTANT: The US Department of Commerce’s Ursula Burns is a rarely seen US government consultant to be put forward to sit on the board, nominated as an independent director Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, yesterday nominated 10 candidates for its new board of directors, including Ursula Burns from the US Department of Commerce. It is rare that TSMC has nominated a US government consultant to sit on its board. Burns was nominated as one of seven independent directors. She is vice chair of the department’s Advisory Council on Supply Chain Competitiveness. Burns is to stand for election at TSMC’s annual shareholders’ meeting on June 4 along with the rest of the candidates. TSMC chairman Mark Liu (劉德音) was not on the list after in December last