Corporate debt defaults and a stretching real-estate bubble have complicated China’s economic outlook, although the risk to Taiwanese markets remains low, the Mainland Affairs Council said in a report published in February.
The report assessing the potential effect of Chinese economic conditions on Taiwan is part of a set of briefings on China and cross-strait affairs commissioned by the council.
Chinese financial markets have since November 2020 been rocked by a wave of debt defaults at state-owned enterprises, wrote lead author Li Chi-keung (李志強), an associate professor at Tamkang University’s Graduate Institute of China Studies.
Photo: Reuters
Available data show at least 143 debt defaults last year totaling 185.45 billion yuan (US$29.14 billion), a 30 percent increase over the previous year and a new record, Li said, adding that the trend is expected to continue this year.
Meanwhile, it remains unknown whether the collapse of troubled developer China Evergrande Group could end a real-estate bubble, the report said.
Evergrande’s 1.9 trillion yuan debt is “only the tip of the real-estate iceberg,” Li said.
As of June last year, developers had collectively amassed debt totaling 32.5 trillion yuan — about 28.4 percent of China’s GDP — of which 960.3 billion yuan is due this year, he said.
Real estate likely accounted for 6.8 percent of China’s GDP last year, Li said.
When the construction industry is included in the figures, the proportion rises to 13.8 percent, and to 29 percent if related services such as sales are included, he said.
Once the bubble bursts, the financial impact would be just as extreme as what occurred after the 2007 subprime mortgage crisis in the US, Li said.
Even if housing prices do not collapse, the depressed market would dampen China’s economic growth this year, challenging its 5.5 percent growth target, he added.
Despite these risks, Li said he does not foresee any major or imminent impact on Taiwan.
A full-scale financial crisis is unlikely in the near term, considering the nature of China’s state-run financial system and strict capital outflow restrictions, he wrote.
China and Taiwan also have relatively independent finances, meaning that a financial collapse in China would have limited direct effects on Taiwanese markets, he said, adding that outstanding debts owed to Taiwanese supply-chain firms pose the greatest challenge.
However, Chinese efforts to mitigate risk might have some effect on Taiwanese firms, Li said.
Beijing is to “deleverage” by tightening lending and monetary policy, further depressing corporate investment, with a domino effect on demand for raw materials and components from Taiwan, he said.
Effects would vary across industries, with steel, concrete and plastics experiencing the most significant losses, he wrote, citing a 21.9 percent decline in steel exports to China and Hong Kong in December last year.
However, demand in the electronics industry remained steady, he added.
In investment terms, production capacity by Taiwanese firms has gradually moved out of China in the wake of the US-China trade dispute and the COVID-19 pandemic, the report said.
Taiwanese firms last year invested US$5.86 billion in China, excluding Hong Kong, a decline of 0.7 percentage points year-on-year, it said.
Considering carbon curbs and electricity restrictions in China, coupled with financial risks and a cooling economy, the downward trend is expected to continue into this year, it added.
Three Taiwanese airlines have prohibited passengers from packing Bluetooth earbuds and their charger cases in checked luggage. EVA Air and Uni Air said that Bluetooth earbuds and charger cases are categorized as portable electronic devices, which should be switched off if they are placed in checked luggage based on international aviation safety regulations. They must not be in standby or sleep mode. However, as charging would continue when earbuds are placed in the charger cases, which would contravene international aviation regulations, their cases must be carried as hand luggage, they said. Tigerair Taiwan said that earbud charger cases are equipped
Foreign travelers entering Taiwan on a short layover via Taiwan Taoyuan International Airport are receiving NT$600 gift vouchers from yesterday, the Tourism Administration said, adding that it hopes the incentive would boost tourism consumption at the airport. The program, which allows travelers holding non-Taiwan passports who enter the country during a layover of up to 24 hours to claim a voucher, aims to promote attractions at the airport, the agency said in a statement on Friday. To participate, travelers must sign up on the campaign Web site, the agency said. They can then present their passport and boarding pass for their connecting international
WEATHER Typhoon forming: CWA A tropical depression is expected to form into a typhoon as early as today, the Central Weather Administration (CWA) said yesterday, adding that the storm’s path remains uncertain. Before the weekend, it would move toward the Philippines, the agency said. Some time around Monday next week, it might reach a turning point, either veering north toward waters east of Taiwan or continuing westward across the Philippines, the CWA said. Meanwhile, the eye of Typhoon Kalmaegi was 1,310km south-southeast of Oluanpi (鵝鑾鼻), Taiwan’s southernmost point, as of 2am yesterday, it said. The storm is forecast to move through central
The age requirement for commercial pilots and airline transport pilots is to be lowered by two years, to 18 and 21 years respectively, to expand the pool of pilots in accordance with international standards, the Ministry of Transportation and Communications announced today. The changes are part of amendments to articles 93, 119 and 121 of the Regulations Governing Licenses and Ratings for Airmen (航空人員檢定給證管理規則). The amendments take into account age requirements for aviation personnel certification in the Convention on International Civil Aviation and EU’s aviation safety regulations, as well as the practical needs of managing aviation personnel licensing, the ministry said. The ministry
RSS