Central bank Governor Yang Chin-long (楊金龍) yesterday voiced concern that the US might again place Taiwan on its currency watch list, as the nation is falling short of Washington’s standards amid the effects of the US-China trade dispute.
The US Department of the Treasury is to update its semi-annual currency-monitoring list this month and in April next year.
The measures it uses to back currency manipulation charges include a trade surplus of more than US$20 billion, a current-account surplus in excess of 3 percent of GDP and unilateral interventions in currency markets that exceed 2 percent of GDP, Yang said.
Photo: Taipei Times
Taiwan is approaching the first two thresholds, with Taiwanese firms benefiting from shifts in electronics supply chains as businesses respond to tariffs imposed by Washington on Chinese goods, Yang told the Legislative Yuan’s Finance Committee in Taipei.
The trend might deepen if the trade issues escalate further, which would make additional facility relocations and order transfers inevitable, Yang said.
Taiwan had a trade surplus for the year to August of US$29.47 billion, with exports to the US rising 18.7 percent to US$30.2 billion from the same period last year, despite a slowdown in global trade, Ministry of Finance statistics showed.
Major tech firms have shifted production lines home from China, especially those that provide shipments to the US.
Taiwan could be a winner and a victim of trade frictions after registering a US$16 billion trade surplus with the US in the first half of this year, former premier Sean Chen said, citing US government data.
The trade figures might see Taiwan labeled a currency manipulator and punitive tariffs imposed on exports to the US, Chen said.
Yang said that the nation could make the watch list if it fails two tests and labeled a manipulator if it fails all three.
The central bank has kept a balanced current account as of September last year, despite efforts to help stabilize the New Taiwan dollar, Yang said.
“The central bank was a net buyer [of the NT dollar] in May and a seller in June,” Yang told lawmakers without elaborating.
The US put Taiwan on the watch list in 2016 and early 2017, saying that the central bank repeatedly intervened in the foreign-exchange market to support Taiwan’s exports by stopping the local currency from appreciating.
Authorities would pay close attention to the issue and bilateral communications are smooth, Yang said.
Meanwhile, the central bank said that there is no need to cut the interest rate, despite peers worldwide leaning on monetary easing to cope with a global slowdown, with two more rate cuts expected by the US Federal Reserve this year, Yang said.
It is inappropriate for US President Donald Trump to demand rate cuts given the Fed’s independent operations, he said.
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