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:
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