Various research institutes have made predictions for the economy this year and most of them are cautiously optimistic.
The Yuanta-Polaris Research Institute’s outlook is typical. It describes the economy as being in a “stalled recovery,” rather like a stalled car. Everyone is watching and waiting to see how the government goes about implementing its economic policies.
An economic research team formed by Cathay Financial Holding and National Taiwan University takes a similar view, saying that this year the economy will be like a car that has come out of a tunnel, but has to maintain the speed limit.
The National Development Council’s economic monitoring system — a composite of several indicators — has flashed “green” for the past five months, indicating steady growth, and year-on-year exports are growing. It seems the economy’s engine is warming up, but it is not ready to drive, as if it is waiting for the government to wave a green flag.
Many ideas have been put forward as to how to revive the sluggish economy.
Some suggest principles and broad directions like increased government spending, structural reforms and monetary policy. Substantial policies include increased urban renewal and tax cuts.
There is also President Tsai Ing-wen’s (蔡英文) “five innovative industries” policy for developing innovative sectors, namely “industry 4.0”: the “Asian Silicon Valley” project, biomedicine, “green” technology and defense, and new agriculture and a circular economy.
One issue that receives scant attention is that of attracting manufacturing back to Taiwan and especially persuading Taiwanese businesses operating in China to return to Taiwan and invest locally.
This is a puzzling omission. The economy is depressed, with insufficient domestic demand making it impossible to provide more employment opportunities and raise salaries.
This is because of the triangular trade model in which exporters take orders in Taiwan and produce goods in China, which has become the norm in manufacturing. It has made Taiwan economically over-reliant on China. China accounts for two-fifths of Taiwan’s export market and nearly three-fifths of Taiwan’s export orders are manufactured overseas.
If Taiwanese businesses abroad returned to Taiwan, it could remove dependency, but Tsai’s government has shown little interest in this.
A key reason the economy lacks growth is insufficient investment. Taiwanese have immense savings, so there is no shortage of capital.
However, Taiwanese are unwilling to invest in the real economy or stocks and shares, which has caused a steep decline in trading volume on Taiwan’s stock market.
Meanwhile, capital is flowing abroad in large quantities — amounting to US$284.1 billion over 25 successive quarters. Given the scale of the economy, Taiwan’s capital outflows are even more serious than China’s.
Tsai’s innovative industries plan is unlikely to take shape in the short term, so the best way to increase investment would be to use preferential policies to encourage overseas-based Taiwanese businesspeople to return. This would have an immediate effect and provide strong impetus for economic growth.
This is the best way to increase investment for three reasons: the international environment; China’s business environment and political risks; and Taiwan’s advantages.
In the international environment, a backlash to globalization is forming. US president-elect Donald Trump’s call for manufacturers to return to the US is an indicator of this. Since his election, Trump has been pushing major US manufacturers to return production to the US. When transportation costs are taken into account, US manufacturing costs are no longer vastly different from China.
Cao Dewang (曹德旺), also known as Cho Tak Wong, chairman of China’s Fuyao Glass Industry Group, who has recently invested US$600 million in the US, agrees that overall production costs in the US would not be higher than in China. Taiwan is in a similar situation.
Taiwanese businesspeople in China estimate that annual salaries for Chinese workers are about 70,000 yuan (US$10,172). When the mandatory “five insurances” and housing funds are added, Chinese workers’ pay is not much less than that of Taiwanese workers.
If manufacturers can move to the US without becoming uncompetitive, then it should be even easier for the government to have Taiwanese businesspeople in China move production back to Taiwan, if it takes steps to attract them.
China’s business environment is getting increasingly worse. Wages have been rising steeply each year and pollution is a serious problem.
Although excessive government subsidies give Chinese products a low-price advantage, they have also brought the serious consequence of excess productive capacity.
Furthermore, bubbles in bond and property markets and shadow banking are near to bursting, and a financial crisis could happen at any time. Squeezed by these factors and the “red supply chain,” Taiwanese businesspeople are finding China’s business environment ever more difficult.
China seems to be using all sorts of administrative pressures to drive Taiwanese OEM/ODM manufacturers inland, away from coastal areas, to act as pioneers in developing the economy of those regions.
If they succeed, they will help China close the gap between coastal and inland regions and between the cities and rural areas. If they fail, the loss will be borne by Taiwanese businesspeople, with no harm done to China.
Even worse, Taiwanese businesspeople in China have become hostage. Recent examples include seafood restaurant chain Hai Pa Wang’s (海霸王) newspaper advertisement declaring that it supports the “one China” principle. Another is the Chinese authorities’ demand for shoe manufacturer Feng Tay Group (豐泰) to pay 222 million yuan in back taxes. Chinese authorities have repeatedly said that they will not allow Taiwanese businesspeople who support Taiwanese independence to make money in China.
So from both a economic and political view point, now is the time for China-based Taiwanese businesspeople to return.
Taiwan has always had excellent manufacturing abilities. Real wages in Taiwan have sunk back to the levels of 16 years ago, so real production costs are not much higher than in China. If Taiwanese businesspeople come back, Taiwan can provide them with well-qualified workers and help them to quickly establish complete supply chains.
They will then be able to bring a new luster to the “made in Taiwan” brand. At the same time, they could lead economic growth and bring about a new “Taiwan miracle.”
However, we have to wait for the government to offer comprehensive complementary measures. Only then will it be possible to attract an incoming tide of returning Taiwanese businesses.
Getting manufacturers to return to the US is a core policy of “Trumponomics.” Has Tsai’s government learned anything from it?
Translated by Julian Clegg
Speaking at the Copenhagen Democracy Summit on May 13, former president Tsai Ing-wen (蔡英文) said that democracies must remain united and that “Taiwan’s security is essential to regional stability and to defending democratic values amid mounting authoritarianism.” Earlier that day, Tsai had met with a group of Danish parliamentarians led by Danish Parliament Speaker Pia Kjaersgaard, who has visited Taiwan many times, most recently in November last year, when she met with President William Lai (賴清德) at the Presidential Office. Kjaersgaard had told Lai: “I can assure you that ... you can count on us. You can count on our support
Denmark has consistently defended Greenland in light of US President Donald Trump’s interests and has provided unwavering support to Ukraine during its war with Russia. Denmark can be proud of its clear support for peoples’ democratic right to determine their own future. However, this democratic ideal completely falls apart when it comes to Taiwan — and it raises important questions about Denmark’s commitment to supporting democracies. Taiwan lives under daily military threats from China, which seeks to take over Taiwan, by force if necessary — an annexation that only a very small minority in Taiwan supports. Denmark has given China a
Many local news media over the past week have reported on Internet personality Holger Chen’s (陳之漢) first visit to China between Tuesday last week and yesterday, as remarks he made during a live stream have sparked wide discussions and strong criticism across the Taiwan Strait. Chen, better known as Kuan Chang (館長), is a former gang member turned fitness celebrity and businessman. He is known for his live streams, which are full of foul-mouthed and hypermasculine commentary. He had previously spoken out against the Chinese Communist Party (CCP) and criticized Taiwanese who “enjoy the freedom in Taiwan, but want China’s money”
A high-school student surnamed Yang (楊) gained admissions to several prestigious medical schools recently. However, when Yang shared his “learning portfolio” on social media, he was caught exaggerating and even falsifying content, and his admissions were revoked. Now he has to take the “advanced subjects test” scheduled for next month. With his outstanding performance in the general scholastic ability test (GSAT), Yang successfully gained admissions to five prestigious medical schools. However, his university dreams have now been frustrated by the “flaws” in his learning portfolio. This is a wake-up call not only for students, but also teachers. Yang did make a big
RSS