II. Economic Structure of Taiwan
Taiwan's Economic Structure
In 2014, Taiwan’s GDP component is mainly
distributed into manufacturing industry by 30.0%, wholesale and retail trade
industry by 17.0%, finance and insurance industry by 6.9%, real estate and residential
service industry by 8.5%, and other services by 30.5%. Other services generally
refer to tourism, food and beverage, education, technical support service,
logistic, etc.
Taiwan’s
economy is highly contributed by tertiary production. Tertiary production
accounts approximately 64% of Taiwan’s GDP. The interesting point is that the
largest sector within the tertiary production is wholesale and Retail Trade
service followed by real estate and residential service. These services are
relatively low value-added, comparing to industries like finance and
professional services. High value-added industry like finance and insurance
industry only accounts approximately 6.9% of Taiwan’s last year GDP. Meanwhile,
manufacturing industry contributes 30% to Taiwan’s GDP. In another word, Taiwan
does not perform high degree of specialization within its economy, comparing to
nearby places like Hong Kong whose tertiary production contributes over 90% of
its economy.
Generally speaking, Taiwan’s economic
structure remains similar since the 21st century. Tertiary
production remains the largest production sector, contributing over 60% of the
country’s GDP. It is followed by secondary production contributing 30% of the
GDP. Primary production like agricultural
and mining industry in Taiwan is insignificant that contribute not more than 2%
of GDP.
From
the graph, it can be seen that the manufacturing industry has been gradually
developing with a positive growth rate. Even though facing global economic
recession in 2009, the manufacturing industry was able to recover immediately
and recorded 22% growth rate in 2010. Despite the significant growth rate in
2010, manufacturing industry contribute similar proportion output to Taiwan’s
GDP at around 28-30% and remains the largest industry sector in Taiwan.
GDP Component
From the graph, private consumption
expenditure is the largest contributor to Taiwan’s GDP, contributing 52% of the
output in 2014. On the other hand, government expenditure contributes 13.55% of
Taiwan’s GDP. It can be said that consumption is an important GDP component to
Taiwan.
It can be observed that Taiwan’s trade
has significantly expanded for the last decade. Since the 21st
century, Taiwan’s export value has increased for more than a double since 2000,
contributing 12,000 billion to Taiwan. Import trade of Taiwan has also gradually
increase since 2000 from 49.92% to 58.19% in 2014. Net export trade in Taiwan
has been boosted greatly from 2% to 12% in the last decade. It can be predicted
that net export will gain more importance and attention in Taiwan’s coming
development. However, the release of settlement of the Free Trade Agreement
(FTA) between China and Korea will undoubtedly impact the export of Taiwan as
China being one of the largest trading partner. Despite the disadvantage, the
introduction of Individual Visit Scheme to Chinese tourists is favorable to the
export of service. Taiwan is planning to expand the scheme to more cities in China
in the near future. In the near future, it is analyzed that the effect of FTA
to Taiwan is not obvious as the implementation of FTA is still at its early
stage and not formally introduced.
Taiwan’s production pattern leads to a
relatively low/medium economic growth trend due to low marginal return. From
the graph, Taiwan attains a moderate economic growth rate of 3 to 4%
approximately. Economic growth can be said mainly supported by export,
consumption and foreign investment. In 2009, as affected by global economic
recession and European debt crisis, Taiwan recorded a negative growth rate of
1.57%. However, it was able to recover significantly and achieve a 10.63%
growth rate in the year after. It is a result of both external and internal
factors. From the graph, externally Taiwan benefited from the recovery of
global economy which resulted in increase in foreign export, especially to
newly developing countries. Internally, the domestic investment stimulated the
private consumption expenditure of Taiwan which offset the negative impact
brought by the global recession.
As the relationship between Taiwan and
China has been improving in these few years, it is predicted that there would
be more cooperation between them, not to mention the Individual Visit Scheme.
Meanwhile, benefiting from the improvement in European economy, Taiwan’s export
is expected to grow in near future as well. Under several uncertainty faced by
Taiwan, it is believed that Taiwan can still achieve growth. Externally,
fluctuating energy price and interest rate adjustment by US federal are two
major aspects that we should keep an eye on. Internally, FTA is one big issue
to be studied to see its effect to long run Taiwan’s export.
Reference:
Chung-Hua Institution for economic research
Stock-AI
Taiwan Institution of Economic Research
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