News6-Taiwan tops Asian tigers in 2014 economic growth

News6-Taiwan tops Asian tigers in 2014 economic growth

South Korea, Singapore, Hong Kong and Taiwan are deemed the Asian tigers, meaning that these economies are thriving and seems to have influential power among Asian countries. The news article mentioned Taiwan was back at the head of the group for the first time since 2000.

Taiwan's have a stable and substantial economic growth in the past three years, it has once declined due to the fall in exports of electronic devices, but it seems recovering steadily now. Moreover, Taiwan boasts the most equitable household and individual income distribution as well as the lowest average inflation rate for 2000 to 2014. Real wage also receives a growth last year. These indicators show that Taiwan's economy is thriving and robust and we can anticipate a continuous growth in a not-so-distant future.

Source: http://www.taiwantoday.tw/ct.asp?xItem=228658&ctNode=421

News5-Ma eyes AIIB membership for Taiwan

News5-Ma eyes AIIB membership for Taiwan

President of Taiwan, Ma Ying-jeou said that Taiwan should join the Asian Infrastructure Investment Bank in order to raise their profile in the international community and demonstrates their commitment to assisting less developing countries. Because most of the potential beneficiaries of nascent institutions are members of the Region Comprehensive Economic Partnership, members would assist in paving the way to Taiwan to participate in region trade blocs. If Taiwan successfully join the bank, the local financial sector would gain a lot, and this opens up tremendous business opportunities for Taiwan’s private sector.

Source: http://www.taiwantoday.tw/ct.asp?xItem=228782&CtNode=415

Country Analysis-Taiwan [Table of content]

Table of content

Introduction:
Welcome to our blog. We are a team working on the analysis of Taiwan economy. Here are our full report and some notable news relevant. Please click on the following titles in a bid to get a quick access to the corresponding part of analysis and see the performance of Taiwan economy during the past few decades. Please enjoy and feel free to comment:)

I. Economic history of Taiwan
   -History of Economy/important events happened since 2000

II. Economic Structure of Taiwan
    -Economic structure
    -GDP component

III. GDP and other economic indicators
     -Nominal GDP
     -Real GDP
     -GDP per capita
     -Gini coefficient (Distribution of wealth)
     -Consumer Price Index (Inflation)
     -Unemployment rate

IV. Major risks encountering
      -Over-dependence on China
      -Higher electricity costs
      -recommendation

V. Recent News
      -News1-Taiwan's jobless rate falls to lowest level in nearly seven years amid surge in tourism
      -News2-Taiwan braces for weakest economic growth in five quarters
      -News3-Taiwan Jan exports beat expectations, but outlook uncertain
      -News4-Taiwan Feb exports disappoint, but cheaper imports may help economy

IV. Major risks encountering

IV. Major risks encountering

Over-dependence on China

On March 30  2014, up to half a million Taiwanese marched to protest against the passage of the Cross-Strait Service Pact with China, citing an unlawful approval process and the agreement’s potential overarching impact on national security. Becoming too dependent on China may have disastrous economic and political consequences for Taiwan.

Free trade and foreign investment are undoubtedly crucial to economic growth and a nation’s wellbeing, especially for a country like Taiwan, which relies heavily on trade. However, free trade is no longer the sole consideration when your trading partner poses a clear national security threat. The Ma administration’s policies conveniently neglect the consequences of “locking” Taiwan’s economy with the very source of the main security threat facing Taiwan. Ma claims that the Service Trade Pact will boost Taiwan’s economy by allowing Taiwanese companies to leverage the potential of Chinese markets through the lifting of trade and direct investment restrictions. However, this cuts both ways. The government has to bear in mind that the agreement would also expose Taiwan to its rival across the strait — a major concern that drove the people to the streets on March 30, and a concern that has been weakly addressed by the government since then.

In 2013, 62 percent of approved overseas investment and 39 percent of Taiwan’s exports went to China. The reliance of Taiwan’s economy on China is already disproportionate. The potential of a “hard landing” for China’s overheating economy, which already shows the signs of decelerating investment, could overwhelmingly impact Taiwan’s industries. Meanwhile, China’s ability to change laws and policies in an opaque fashion with little notice and possibility for redress adds another layer of risk. The recent examples — banning SOEs from hiring foreign consulting firms and prohibiting government purchases of Microsoft’s newest operating system — reveal the risks all foreign companies face when investing in China. As Taiwan continues to tie its economy more closely to China, unexpected new trade and investment policies from Beijing could pull the rug out from under Taiwan’s economy.

Recommendations-Over-dependence on China

Taiwan may actively seek to participate in regional and global economic integration, increase the added value ratio of industrial sectors and upgrade the international competitiveness of Taiwanese enterprises.

Taiwan’s market share in China to rise at the same time as a decline occurs in the proportion of Taiwan’s exports accounted for by cross-Strait sales. Though difficult, achieving that ideal is considered possible by trade experts – but only if Taiwan can make the transition to producing and exporting finished products with a strong brand image. Possessing that strength in finished products would make Taiwan less vulnerable to China's localization process.

It would also enable Taiwan to assert itself on the international stage to many markets, not just China – and such diversification would cause the percentage of Taiwan’s exports going to China to diminish. At the same time, if Taiwan has stronger brands it would be in a position to sell more to China at the expense of competing products from Korea and Japan, enabling Taiwan to achieve the dual goals of a higher market share on the mainland even while China accounts for a lower proportion of Taiwan's exports.

It would therefore be possible for Taiwan to be less trade-dependent on China and more competitive in the China market at the same time.

Higher electricity costs

Taiwanese manufacturers may have to shoulder higher electricity costs after the government announced it would stop construction on a new nuclear power plant.

Taiwan's three nuclear plants, altogether six reactors, are supplying nearly one-fifth of the island's electricity. When they are phased out by 2025 as planned and without a fourth plant to fill the energy gap, domestic power prices will have to rise by at least 40% to subsidize more expensive alternatives such as natural gas, solar and wind, Economics Minister Chang Chia-juch said.

Graph 1

Taiwan Power Company has already spent TWD 330 billion ($11 billion) building the fourth nuclear plant – one of the reactors is already finished – and it would have to write off the asset completely if the project were cancelled.

Tuntono calculates that the government could be forced to inject up to TWD 540 billion ($18 billion), or 3.7 percent of GDP, simply to keep the utility solvent. The government would likely have to float bonds to cover the expenditure, which is equivalent to one-fifth of annual government spending. That would increase the general government debt 3.7 percentage points to 46.1 percent of GDP, bringing the total public debt at all levels of government very close to the statutory limit of 50 percent.

Higher power prices would also hurt corporate earnings. Steel manufacturers would be among the hardest-hit, with an earnings hit of as much as 5 percent for each 10 percent increase in electricity prices. Finally, buying fossil fuels to cover Taiwan’s energy needs would increase total imports by $4.8 billion, or 27 percent, thereby slashing the island’s $57 billion current account surplus by 8.3 percent. That, in turn, would put pressure on the Taiwanese dollar.

Recommendation- Higher electricity costs

ü   Emulate Germany’s push into the green economy

Graph 2

That’s been the talk for several years, and President Ma Ying-jeou put green tech at the fore of his agenda early in his presidency. Ma vowed to put Taiwan on the path towards sustainability, promising huge reductions in carbon emissions while pushing green technologies that would open up new markets for Taiwan’s high-tech sector. Taiwan now has the world’s second largest solar cell manufacturing and LED industries and has staked significant market shares in energy storage and electric vehicles. In 2010, Taiwan was ranked second in Asia, sixth in the world for contributing to Green Economy by the International Institute for Management Development (IMD).

Taiwan has become a heavyweight in exporting green technology, it has lagged in renewable energy deployment at home. In 2013, the country had around 8% of installed power generating capacity in renewables, generating some 4% of its energy.

Taiwan may extend the life of the three existing nuclear plants and develop more comprehensive green technologies to generate electricity. So as to stabilize the price of electricity.

Reference:

Graph 1: https://www.thefinancialist.com/the-economic-consequences-of-de-nuclearization/

Graph 2:http://www.amcham.com.tw/connect/taiwans-renewable-energy-challenge/

III. GDP and other economic indicators

III. GDP and other economic indicators

Nominal GDP
Gross domestic Production (GDP) is deemed one of the most significant and frequently used economic indicator as it can somehow reflect the standard of living and the apparent situation of an economy. It measures of national income and output for a given country’s economy in a specific period of time.

Graph 1

Taiwan

household consumption: 59.5%  government consumption: 12.2%  investment in fixed capital: 19.4%  investment in inventories: 0.3%  exports of goods and services: 73.1%  imports of goods and services: -64.5%  (2013 est.)

Graph 2

Taiwan’s GDP have a stable and sharp increase since 2000, from 326 billions of U.S. dollar in 2000 to 489 billions of U.S. dollar in 2015, which was also the highest among previous years. Refer to graph 2 and correlate with graph 1, graph 2 shows the component of GDP of Taiwan, it is largely contributed by household consumption, and comparatively small by government consumption. Linking with graph 1, the ballooning GDP, this likely reflects that Taiwan citizens’ material standard of living is enhancing overtime. We can further prove this by having a look on the following parts discussing the real GDP, GDP per capita and other indicators.

There is a drastic drop of GDP in 2001, a sudden shrank of 4.2 percent in the third quarter. Taiwan suffered from recession as there was a rapid dropoff in demand for electronics products from United States, Taiwan’s biggest export market (You may also refer to our First part: Economic history of Taiwan for more details) [1] , and the deflationary pressure in asset market, the continuous credit crunch have led to production cutbacks. It starts to recover steadily due to the expansionary monetary policy adopted. [2]

Graph 3

The GDP growth rate of Taiwan is increasing over the past few years. On a city basis, its size and resources has limited Taiwan to compete with countries like China and Vietnam as it cannot launch a large-scale production or industrialization as them but to face keen competition on developing tertiary industry. However, a GDP growth rate of 3.7% in 2014 is on par comparing with other cities. Taiwan can maintain its status among “East Asian tigers”, which has a similar or even higher GDP growth rate than Singapore, Hong Kong and South Korean in 2014, and according to DBS SME Banking, Taiwan is estimated to advance steadily and keep the position.

Real GDP

Graph 4

Graph 4 shows the trend of real GDP of Taiwan from 2000 to 2015, overall, it indicates the rise of real GDP of Taiwan and the standard of living of Taiwanese since it is the inflation-adjusted value. Some country may have high GDP at current price but we cannot confidently conclude that it has a high standard of living as the price of goods and services might be high too. However, real GDP, known as the GDP at constant price, which means using the price of base year to calculate can more likely show the real production situation of an economy. Thus, besides showing the improving standard of living, it also gradually manifest Taiwan has become a productive country.

GDP per capita

Graph 5

Graph 5 shows the real GDP per capita of Taiwan economy, GDP per capita is a more accurate economic indicator reflecting the standard of living of people since it is population-adjusted. Even if an economy has a high real GDP, we can analyze that this economy is productive, but we cannot conclude that the people have a high standard of living because population of economy is a major factor too. An economy with high real GDP and large population might reflect a low level of standard of living. Studying graph 4, we can know that the material standard of living of Taiwanese is actually increasing overtime, it is likely that more goods and services are available to consumers and consumers are in a better position to buy them. From 1980 to now on, the GDP per capita has increased in four-fold.

Graph 6

Graph 7

Ranking the 29^th based on the GDP per capita on a purchasing power parity (PPP) basis, Taiwan has scored a quite high ranking already. PPP, calculated in U.S. dollar, determine U.S. prices against domestic prices. The price stability is vital in calculation, on which Taiwan focuses so heavily and thus its purchasing power leap ahead of many cities, and even some advanced countries like Japan [3]. Though it is still way far from overtaking economies like Singapore and Hong Kong due to the problem of relatively lower labour productivity.

There is another metric measuring only actual individual consumption, in which Taiwanese spending US$25129 per capita beats Singaporeans (US$24725), Japanese (US$24447) and South Korean (US$17481). [4] This measure is a better indicator to show the material well-being of people than GDP per capita since components such as military is not related to their life. This can focus on their consumption and can better reflect the real material living standard of people.

Taiwanese is enjoying a quite high material living standard as a whole. China and Japan are known as the 2^nd and 3^rd large economy, measuring of its GDP, but they have a ranking of 121^th and 37^th comparing to Taiwan, meaning each person in Taiwan is sharing a high value of GDP. We will consider the Gini coefficient in the later part to see its standard of living in a more accurate way)

Gini coefficient-Distribution of wealth

Graph 8

Graph 9

According to graph 8, the problem of income inequality seems not severe, as Taiwan only rank 94^th and the Gini index is much lower than others. Also, the Gini coefficient of Taiwan didn’t exceed 0.4, which seems not grave at all. However, we can have a look on graph 9, is shows that the Gini coefficient of Taiwan is low comparing to others, however, for disposable income, Taiwan’s Gini coefficient rank much higher since the government didn’t adapt policies to help the underprivileged such as transfer payment or induce higher taxes on the wealthy people.

Graph 10

From the above graph, it indicates the gravity of the problem of uneven distribution of income. There is a trend of increasing wealth gap, the top 20% of people owns much more than the lowest 20% of people. It means that there may be large variety of high quality goods and services available in Taiwan but lots of Taiwanese may not be affordable, which affects the well-being of living standard. The government should improve the situation without further ado, or else the Gini coefficient may exceed the line of 0.4.

Consumer Price Index-Inflation

Graph 11

The above shows the consumer price inflation rate over years of Taiwan, it fluctuates a lot, experienced inflation and deflation. Overall, the problem of inflation is not severe. During, 2003 and 2009, they are the two great recessions of Taiwan. In 2008, there is a sharp increase due to the financial stimulus plan and then the economy suffered from a financial crisis and fall drastically. Although it rebounded a little bit in 2010, it is only half of 2005’s rate.

Graph 12

Comparing with other economies, Taiwan’s case is definitely not severe, it ranked only 208^th on its inflation rate (consumer price), referring to graph 11, the inflation rate of Taiwan is most likely between 1% to 2%, in which Hong Kong and Singapore have around 5% inflation rate. It is because Taiwan has a tight control on price level, especially in pharmaceutical market.

Inflation rate on consumer price is much more reliable than GDP deflator when we measures the living standard since CPI only focus on consumers’ consumption. It measures a basket of consumer goods and services while GDP deflator measures all domestic goods and services produced in a specific period of time CPI also have different weighting according to our consumption pattern, which can reflect the living standard more accurate.

Unemployment rate

Graph 13

The unemployment rate of Taiwan has been fluctuating from 1980, but it is gradually increasing as well, from around 1% to around 4% to 5%, which can be deemed drastic. The peak in 2010 is due to the financial crisis encountered in 2008 and the economy went down a recession, in 2003 Taiwan also faced a great recession, pushing the unemployment rate to rise. After the financial crisis in 2008, the government immediate adopted policies to stimulate the economy and boost youth employment.

The youth unemployment rate seems more severe, having a unemployment rate of 12.27 percent [5] , which will be a problem correlate with aging problem in the society, Taiwan should consider the labour participation rate.

Conclusion

Taiwan as a whole can enjoy a high material living standard studying the GDP per capita and real GDP. However, not everyone can enjoy or have this privilege, the problem income inequality is becoming more and more grave. Generally speaking, the standard of living of Taiwan may not be as good as we see from data, as it cannot be determined merely by GDP or Gini coefficient and etc., it also measures the leisure time, the working hours and the environment of Taiwan, but Taiwan fails to perform well in these facets, its long working hours has long been the subject of discussions, and the government has not attach much importance on the conservation of environment yet. Therefore, whether the living standard of Taiwanese is good or bad needed debates. However, by looking at the data and graph, we can conclude that comparing with other economies, Taiwan perform well already, especially on price levels.

Reference:

Graph

[1] http://www.tradingeconomics.com/taiwan/gdp

      GDP over time

[2] https://www.cia.gov/library/publications/the-world-factbook/fields/print_2259.html

      GDP component

[3] http://www.tradingeconomics.com/taiwan/gdp-at-constant-prices-imf-data.html

      Real GDP in TWD billion

[4] http://www.economywatch.com/economic-statistics/Taiwan/GDP_Per_Capita_Constant_Prices_National_Currency/

      Real GDP per capita

[5] http://www.indexmundi.com/g/r.aspx?v=67

      Real GDP per capita ranking

[6] http://econsmalaysia.blogspot.hk/2012/04/nexus-of-corruption-and-higher-income_06.html

      PPP adjusted real GDP per capita in 2005 prices (chain series) from the Penn World Tables in international USD from 1950 to 2009

[7] http://www.dbs.com.hk/sme/aics/economics.page

      GDP growth rate comparison

[8] https://www.cia.gov/library/publications/the-world-factbook/rankorder/2172rank.html

      Gini index ranking

[9]https://www.google.com.hk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=8&ved=0CFkQFjAH&url=http%3A%2F%2Fau5782.epage.au.edu.tw%2Fbin%2Fdownloadfile.php%3Ffile%3DWVhSMFlXTm9Mek0zTDNCMFlWODBPREF6T0Y4eU56SXlNelkwWHpReE9EVTJMbkJrWmc9PQ%3D%3D%26fname%3DTVRBeTVhMjQ2S0dUNTZDVTZLaU81cHlEUjJsdWFlUy9ndWFWdU9XZ3NlV1JpdWVWcStlM211ZUppQzV3WkdZPQ%3D%3D&ei=7u8OVfCAPaH3mQXZxYG4DQ&usg=AFQjCNEb8N5-LBMBLOFmiMoO6IQpoNeoiQ&sig2=iBk43fMhds0yI1OC-p4qaw

      Gini coefficient comparison

[10] http://opinion.cw.com.tw/blog/profile/261/article/1554

       Gini coefficient of Taiwan

[11] http://www.indexmundi.com/g/g.aspx?c=tw&v=71

        CPI

[12] http://www.indexmundi.com/g/r.aspx?v=71

        Inflation rate ranking

[13] http://eng.stat.gov.tw/point.asp?index=3

        Unemployment rate

Data

[1] http://edition.cnn.com/2001/BUSINESS/asia/11/16/taiwan.gdp/index.html

      CNN News Taiwan hits recession with GDP drop

[2] http://old.npf.org.tw/PUBLICATION/FM/091/FM-R-091-036.htm

     Taiwan’s Economic recession and recovery in the New Government Regime

[3] http://www.taiwantoday.tw/ct.asp?xItem=217212&CtNode=426

     Correct take on Taiwan’s high purchasing power

[4] http://www.chinapost.com.tw/taiwan/business/2014/05/01/406594/Taiwan-beats.htm

     Taiwan beats Japan, South Korean in per capita spending

[5] http://taiwantoday.tw/ct.asp?xItem=217827&ctNode=421

     Youth unemployment

II. Economic Structure of Taiwan

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 21^st 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 21^st 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

http://www.cier.edu.tw/ct.asp?xItem=12270&CtNode=103&mp=1

Stock-AI

https://stock-ai.com/grp-Mix-twEG.php

Taiwan Institution of Economic Research

http://english.tier.org.tw/eng_forecast/monthly.asp

I. Economic history of Taiwan

I. Economic History of Taiwan

History of Economy/important events happened since 2000

Figure 1 (2)

Figure 2 (2)

Figure 3 (2)

Full Financial Liberalization (December 2000)

Financial Liberalization had been implemented in Taiwan since 1970s (4), which aimed to give more opportunities and participation to private entities while the government had less control and regulations on the markets. It includes the liberalization of the exchange rate, the liberalization of the stock market, the privatization of state-owned banks, and the expansion of development financing (7).

In Taiwan at that time, there were re-regulation and formulation of new policy instruments aimed at promoting financial stability and industrial development. The government maintained positive real interest rated by keeping domestic priced stable but no allowing inflation to develop or having to use high nominal rates of interest to offset it (8). Therefore, the real financial growth was higher in Taiwan that time as shown in Figure 1, 2 and 3.

Recession (2001)

Because of the “911” terrorist attacks happened to the twins towers of World Trade Centre in 2001, United States’ economy not only could not be recovered, it led to huge impact on other countries, especially those relied heavily on United States, including Taiwan (10). Therefore, Taiwan’s economy was especially worsen in 2001, which was believed that it was the worst economic crisis in three decades (9). The unemployment rate was 4.5 percent, which was nearly a double of the data in 2000. The exports fell 7.2 percent for the first half year of 2001, and remained negative growth in the second half, while Taiwan relied on exports heavily. United States was the biggest export market for Taiwan, so the number also fell by around 20 percent, which was a very serious economic problem to Taiwan at that time.

Becoming the member of WTO (January, 2002)

Taiwan had great benefits on its economy after becoming one of the members of World Trade Organization (WTO) in 2002. The imports of six major agricultural and industrial sectors (fruits and vegetables, meat products, automobiles, auto parts, semiconductors, and textile and apparel), rose by $5.5 billion, including the combinations of these products mentioned. If we take the whole imports figures into account, the increased amount could be $55 billion in total! From figure 1, it is obvious that the import amount of Taiwan increased rapidly and dramatically from 2001 to 2002, when Taiwan successfully accessed to WTO, leading a good economic environment.

Global Financial Crisis (2008)

Many countries suffered from the financial crisis in 2008, including Taiwan. Taiwan’s real GDP growth slowed down that time, from 6 percent in 2007 to 0.7 percent in 2008 (1). More seriously, the real GDP growth became negative (-1.8 percent) in 2009 because the exports amount dropped a lot especially, after the financial crisis. It showed that there was a huge impact on Taiwan’s economy when Taiwan relied on electronic designs and production at that time but the demand declined suddenly and dramatically (3). Refer to Figure 1 and 2 (2), not only did exports and imports of Taiwan declined in Q3 and Q4 in 2008, the unemployment rate rose and CPI dropped during that time, showing that the economy collapsed because of this financial crisis. In fact, Taiwan was vulnerable to the financial crisis because it depended and relied on exports very much.

However, when we look at Figure 3, we can find that the stock exchange index of Taiwan during 2008 was not especially low due to the financial crisis. It was because of an asymmetric synchronization between United States and Taiwan (2). When the stocks in U.S were very low, Taiwan could not be fully influenced by it.

The impact of 2008 financial crisis did not seem to be very serious until 2009. From Figure 3, it is clear that starting from the beginning of 2009, the stock exchange indices dropped dramatically, nearly the lowest among the records shown. It was caused by the decreasing amount of foreign investments due to financial crisis in 2008. The number of dishonored cheques and bills also increased by about 0.3 percent (2). The bank’s lending was tightened by this business failure (2).

Although the whole world was affected by the crisis, Taiwan recovered very soon from it. The unemployment rate started to fall in November 2010, which has fallen 0.19 percent comparing to the previous month, reaching a low record of 4.73 percent (5). The 2010 GDP, which had a 10.8 percent growth (1), also showed that there was a great improvement in Taiwan’s economy after the financial crisis.

Presidential Elections (March 2000, 2004, 2008)

It would be very interesting when we saw that whenever there was a presidential election in that year, the stock exchange index was high at the time when we look at Figure 3. It was because of the political policies from the elected president, for examples maintaining a good trade relationship between Taiwan and China, when Taiwan started to rely on the trades in China after being a member of international trade organization. As a result, the economic growth was quite obvious during those periods.

Reference:

(1) https://www.gfmag.com/global-data/country-data/taiwan-gdp-country-report

(2) http://www.wilsoncenter.org/sites/default/files/Asia_143.pdf

(3) http://books.google.com.hk/books?id=cEHPisdNINwC&pg=PA208&lpg=PA208&source=bl&ots=zQja91XbYx&sig=6heGMFOJE1qDcSeCouLE4kcwgtc&hl=en&ei=yacTTdzVDYO78gbP7vCXDg&sa=X&oi=book_result&ct=result&redir_esc=y#v=onepage&q&f=false

(4) http://www.worldscientific.com/doi/abs/10.1142/S0219091500000182?journalCode=rpbfmp

(5) http://www.chinapost.com.tw/business/asia/australia/2010/12/22/284742/Jobless-rate.htm

(6) http://focustaiwan.tw/news/aeco/201201300048.aspx

(7) http://www.tandfonline.com/doi/pdf/10.1080/09512740110037370

(8) http://publishing.cdlib.org/ucpressebooks/view?docId=ft758007sm&chunk.id=d0e22209&toc.id=d0e20186&brand=ucpress

(9) http://news.bbc.co.uk/2/hi/business/1452767.stm

(10) https://books.google.com.hk/books?id=ZGOBnO9hSDUC&pg=PA52&lpg=PA52&dq=taiwan+economy+2001&source=bl&ots=x4bqVvbAAl&sig=-EQoXGi9-lyTITmHO-wpWUbW3U8&hl=zh-TW&sa=X&ei=GFAPVfHCOoK1mAWU04KQBg&ved=0CGMQ6AEwCA#v=onepage&q=taiwan%20economy%202001&f=false