As we embark upon a new year, many commentators and media pundits have made their predictions for what this year has in store. With the COVID-19 pandemic entering its third year, everyone is longing for the health crisis to come to an end.
The global economy has yet to recover, and inflation has silently reared its ugly head again.
Taiwan’s economy turned in an impressive performance last year. However, a number of external and internal challenges could require a united effort from all parties in the Legislative Yuan, along with the public, to maintain Taiwan’s favorable economic position.
This year is also an election year. November’s nine-in-one elections promise gripping political theater, with city mayor, county commissioner, and other senior local government positions up for grabs in the six special municipalities and 14 cities and counties. The implications are huge, and pundits have already predicted the elections will be a preliminary skirmish ahead of the 2024 presidential election.
This is also an election year in many other nations. South Korea has a presidential election scheduled for March, followed by France in April and the Philippines in May. In the second half of the year, the US is to hold congressional mid-term elections.
In the fall, the Chinese Communist Party is to hold its 20th National Party Congress. As is customary, the party’s “leading groups” are to undergo changes of personnel through promotions, demotions and retirements, but the overriding focus is certain to be on whether party delegates rubber-stamp Chinese President Xi Jinping’s (習近平) bid for a third term as party secretary, which would amount to his effective coronation as emperor of China.
Then there is Hong Kong, which in March is to hold a chief executive “election” in which the incumbent, Carrie Lam (林鄭月娥), could attain a second term. Whoever wins, most Hong Kongers regard the Beijing-controlled process with cold indifference.
In her New Year’s Day address on Saturday last week, President Tsai Ing-wen (蔡英文) said bringing Taiwan closer to the world, consolidating social security and resolutely defending the nation’s sovereignty would form the backbone of her administration’s work.
On the same day that Tsai delivered her speech, the 15-member Regional Comprehensive Economic Partnership (RCEP) trade agreement came into effect.
With the combined GDP and economic activity of RCEP member nations exceeding that of the EU, this presents Taiwan’s external trade relationships with a new challenge. With the RCEP dominated by China, the likelihood that Taiwan would be able to join the trade grouping is remote.
This puts Taiwan’s traditional export industries at a competitive disadvantage. Although the government’s official line is that the RCEP would not present a significant blow to Taiwanese exporters, Taiwan has nevertheless been marginalized by the trade bloc. This cannot be viewed as anything other than a setback. The Tsai administration surely needs to put afterburners on its New Southbound Policy.
On the plus side, Taiwan has already lodged an application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and is fast-tracking trade liberalization measures to muster support for its application, such as lifting the import ban on Japanese foodstuffs from Fukushima Prefecture and surrounding areas, imposed following the Fukushima Dai-ichi nuclear power plant disaster of March 2011.
Taiwan’s economy continues to grow at a healthy rate, while the stock market and real-estate sector are going gangbusters. Like Singapore, Taiwan’s tight control of COVID-19 has reaped economic rewards. With a world-beating semiconductor industry at its core, Taiwanese industry has pushed the country to global prominence as a leading supply-chain manufacturing hub.
However, Singapore surpassed Taiwan last year, achieving 7.2 percent economic growth, while many Taiwanese are pessimistic about the nation’s economic prospects despite the good numbers.
Although Taiwan’s economic prosperity has been supported by fundamentals, it has been money chasing, a loose currency and fiscal stimulus that have played significant parts in boosting growth.
Taiwan has also benefited from the repatriation of funds from Taiwanese companies based overseas. This has pushed up Taiwan’s stock market, and has also had a knock-on effect on stock markets around the world — 21 out of 48 markets in the MSCI Global Index posted record gains last year.
Taiwan’s frothy economy and sensitive global industrial supply chains have caused commodity price inflation to silently creep across the economy. It remains to be seen whether Taiwan’s public and private sectors would have the headroom to raise wages and offset the corrosive effects of inflation. International interest rate hikes and debt reduction are inevitable, which should lead to increased economic and financial turmoil.
As well, the economic boom has not spread evenly across each sector of the economy. Catering, tourism and private consumption have been more affected by the pandemic than other sectors. The overall economy appears “hot” from the outside, but is not even warm when viewed from the inside: Workers are feeling the pinch, and inflation in commodities and assets has exacerbated the disparity between rich and poor people. The government’s use of stimulus money is simply a temporary solution.
Meanwhile, Taiwan’s economy and society are faced with the long-term challenges of low birthrates and an aging population, which are incredibly difficult problems to solve. Falling enrollment rates at private universities, a shrinking labor force and the drying up of markets are major problems for the nation caused by population decline.
Additionally, the cooling of China’s economy and more frequent financial instability are surely to affect Taiwan’s economy. At the same time, carbon reduction and decarbonization targets are placing pressure on industries through increased costs — “green inflation” is a real problem. Taiwan in particular faces severe challenges from power shortages and the government’s ambitious energy transition program.
Incursions by the Chinese military and other forms of coercion by Beijing can be expected to increase. Chinese leaders are faced with myriad internal problems, and Beijing can be expected to turn up the heat on Taiwan to distract from domestic travails when needed.
Next month’s Beijing Winter Olympics are facing resistance from many quarters. Not only are Western nations imposing diplomatic boycotts, Beijing originally touted the Games as a “green Olympics,” but has been accused of employing vast quantities of environmentally unfriendly artificial snow. Forced land expropriation by the authorities to make way for venues and facilities has also aroused public anger in China.
Additionally, the Global Imams Council — the world’s largest international body of Muslim religious leaders — has called for a prohibition on Muslims participating in the Games in response to the deprivation of the basic human rights of Uighurs in China’s Xinjiang region.
China’s “zero COVID” pandemic prevention strategy, enormous real-estate bubble and unsustainable local government debt are also causing the country headaches. Beijing’s economic and trade disputes with Washington continue, and China’s economic growth rate is expected to fall to about 5 percent this year.
Taiwan is a peaceful nation that has never invaded another country, yet it faces a life-and-death struggle to prevent annexation by China. Xi’s rapacious designs have put liberal democracies around the world on watch, and reminded nations of democratic Taiwan’s value and geostrategic importance to the world.
Taiwanese should never forget that the ability to defend against China rests in our hands alone. The gods help those who help themselves.
Publius Flavius Vegetius Renatus, during the Later Roman Empire, wrote in the fourth century: “Let him who desires peace prepare for war.”
Chinese general Sun Zi (孫子) wrote something similar in the fifth century: “The art of war teaches us to rely not on the likelihood of the enemy not coming, but on our own readiness to receive him; not on the chance of his not attacking, but rather on the fact that we have made our position unassailable.”
These sage words of advice align with common sense and provide the psychological framework for the robust national defense that Taiwan so desperately needs.
As we embark upon a new year, the results of the efforts of the entire population last year are plain to see, and prove that in the midst of adversity it is always possible to turn things around. There will be many fresh challenges this year that require the concerted efforts of all Taiwanese to cement a bright and prosperous future for the nation.
Translated by Edward Jones
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