Thanks to the recent launch of Apple’s new iPhones and products from other brand-name vendors, Taiwan’s exports and manufacturing production should continue to improve this month and show annual gains in what is left of this year, which would reduce the pressure on the central bank to ease its monetary policy.
Government statistics released last week indicated that export orders increased 8.3 percent last month from a year earlier to end 16 straight months of annual decline. The Ministry of Economic Affairs predicted that export orders are likely to continue rising this month, thanks to demand for new iPhones and other consumer electronics products.
Customs-cleared exports also grew 1 percent last month from a year earlier for a second consecutive month of annual increase, with the Ministry of Finance forecasting the growth momentum would persist this month and beyond in a new capital spending cycle among local tech firms.
On the domestic front, the consumer price index edged up just 0.57 percent year-on-year last month, its slowest annual gain this year, and it might take a while for the inflationary gauge to reach the central bank’s 2 percent target.
Meanwhile, the official manufacturing purchasing managers’ index (PMI) compiled by the Chung-Hua Institution for Economic Research last month reached the highest level in 16 months, while the Markit/Nikkei measure of Taiwan’s PMI hit an 18-month high in the month, lending further support to a gradual recovery in the economy.
The central bank is scheduled to hold a quarterly board meeting on Thursday. It has cut interest rates for four straight quarters, by a total of 50 basis points, since September last year, but a growing market consensus is that policymakers might be able to breathe a sigh of relief this time as the risk of deflation recedes and exports post a tenuous recovery.
The bank might also opt to stay put given the US Federal Reserve’s decision last week not to raise the cost of borrowing.
However, opinion varies about future interest rates because there is still a lot of uncertainty, such as the sustainability of iPhone-driven recovery, the strength of domestic demand, a potential Fed rate hike and prospects for global and regional growth.
Either way, the central bank’s monetary easing has approached the limits of its effectiveness, as the domestic banking system’s deposit growth has continued to outpace loan growth so far this year.
Statistics compiled by the Financial Supervisory Commission show the loan-to-deposit ratio among domestic banks stood at 72.5 percent as of the end of July, the lowest in the past 10 years, indicating that banks still have plenty of idle funds that could be used more productively. While borrowing costs remain low, publicly listed companies hold heavy cash positions, totaling NT$8.8 trillion (US$280.88 billion) at the end of June, as firms have turned risk-averse and become less willing to invest amid a gloomy economic outlook and volatile financial conditions, the commission said.
Accommodative monetary policy must be complemented with the flexible application of macro-prudential measures, expansionary fiscal policy, and, most importantly, structural reforms of the economy to help digest funds.
If the government cannot create a beneficial investment environment and foster a new model for economic development, with interest rates so low (and possibly heading lower), the large amount of surplus money in the banking system would only flow to the equity and property markets as well as other financial investment fronts.
The government must serve as a catalyst that channels funds into real production activities to stimulate growth.
Chinese Nationalist Party (KMT) caucus whip Fu Kun-chi (傅?萁) has caused havoc with his attempts to overturn the democratic and constitutional order in the legislature. If we look at this devolution from the context of a transition to democracy from authoritarianism in a culturally Chinese sense — that of zhonghua (中華) — then we are playing witness to a servile spirit from a millennia-old form of totalitarianism that is intent on damaging the nation’s hard-won democracy. This servile spirit is ingrained in Chinese culture. About a century ago, Chinese satirist and author Lu Xun (魯迅) saw through the servile nature of
Monday was the 37th anniversary of former president Chiang Ching-kuo’s (蔣經國) death. Chiang — a son of former president Chiang Kai-shek (蔣介石), who had implemented party-state rule and martial law in Taiwan — has a complicated legacy. Whether one looks at his time in power in a positive or negative light depends very much on who they are, and what their relationship with the Chinese Nationalist Party (KMT) is. Although toward the end of his life Chiang Ching-kuo lifted martial law and steered Taiwan onto the path of democratization, these changes were forced upon him by internal and external pressures,
In their New York Times bestseller How Democracies Die, Harvard political scientists Steven Levitsky and Daniel Ziblatt said that democracies today “may die at the hands not of generals but of elected leaders. Many government efforts to subvert democracy are ‘legal,’ in the sense that they are approved by the legislature or accepted by the courts. They may even be portrayed as efforts to improve democracy — making the judiciary more efficient, combating corruption, or cleaning up the electoral process.” Moreover, the two authors observe that those who denounce such legal threats to democracy are often “dismissed as exaggerating or
The Chinese Nationalist Party (KMT) caucus in the Legislative Yuan has made an internal decision to freeze NT$1.8 billion (US$54.7 million) of the indigenous submarine project’s NT$2 billion budget. This means that up to 90 percent of the budget cannot be utilized. It would only be accessible if the legislature agrees to lift the freeze sometime in the future. However, for Taiwan to construct its own submarines, it must rely on foreign support for several key pieces of equipment and technology. These foreign supporters would also be forced to endure significant pressure, infiltration and influence from Beijing. In other words,
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