Books on Taiwan
New Taiwan dollar (TWD)
Update No: 011 - (30/11/04)
Taiwan goes to the polls on Saturday 3rd December to elect a
new legislature (The Legislative Yuan) and there is every indication that the
Democratic Progressive Party of President Chen Shui-bian will emerge the victor.
The DPP may still not have an absolute majority in the country's new legislature
but it does looks set to fare much better than it has done so far and, with the
aid of the Taiwan Solidarity Union (TSU), the DPP's partner in the coalition
pan-green alliance, the DPP looks set to wrest control away from the
conservative pan-blue alliance of the Kuomintang (KMT) and People First Party (PFP).
Certainly the pan-greens have so far shown a much greater degree of unity and
cohesiveness than their opponents and President Chen himself has set a
blistering pace on the campaign trail.
Mr. Chen seems quite elated at the prospect of controlling both the
administration and the legislature but such an outcome may not necessarily be in
the interests of Taiwan or of the region generally. In fact it may embolden
those radical elements among the "pro-Taiwan" groups that may use the
opportunity to take further steps towards declaring formal independence of
Taiwan from China. Of late, Mr. Chen and his Cabinet have softened their
anti-China rhetoric but Beijing still believes that "pro-Taiwan" and
"pro-independence for Taiwan" are two sides of the same coin.
Ahead of the APEC leader's meeting in Chile, President, Chen Shui-bian, renewed
his offer of dialogue with Beijing and again called for confidence-building
measures that would promote stability across the Taiwan Straits. President Chen
reiterated earlier proposals to restart a political dialogue with Beijing and
called for military-to-military contacts as well as the demilitarisation of the
Taiwan Straits. He also pledged that Taiwan would not develop nuclear weapons
"or other weapons of mass destruction" and called on China to make a
Mr. Chen's overtures can be seen as part of a new conciliatory stance towards
Beijing that is closely related to winning the middle ground in the December
election. He has in fact nothing to lose by adopting such a position and since
China is unlikely to respond positively - and indeed has been dismissive of the
gesture - he wins either way. At worst, it can be seen as China baiting -
setting the scene for a more radical policy following an election victory.
The big worry is that Taiwan's current leadership fails to see the bigger
picture - and that is the need to retain the status quo across the Taiwan Strait
so that the region can focus on economic development and stave off any whiff of
Chinese adventurism. Should China escalate the current stand-off and use a
military option of one form or another, then the resultant uncertainties could
plunge the region back into another economic ice-age. Of course, the United
States would not let this happen - at least that is the thinking in Taiwan. But
it risks misjudging the signals from Washington or at least filters out those
that do not conveniently fit into the current mindset of Taiwan's political
leaders. Washington has made it quite clear that it's willingness to come to
Taiwan's aid in any cross-straits confrontation is contingent on an unprovoked
attack by China. Should Taiwan ratchet up the ante with the mainland, then it
might well find itself on its own.
The immediate danger comes with the proposal to amend - or indeed rewrite -
Taiwan's Constitution. If Mr. Chen does succeed in gaining control of the
legislature, this item is expected to be high on the agenda for 2005 with the
promise that the issue would be put to a national referendum during 2006. The
scope of proposed changes remains to be seen but it is already clear that many
in Taiwan will be pushing for radical change - including a change of name for
the country - that would clearly be seen by China as a further step towards a
formal statement of independence. Taiwan's leaders for their part seem
determined to push the limits of Chinese patience, a very unpragmatic approach.
The US position on Taiwan is reaffirmed at APEC
Issues relating to global security were uppermost on President George W.
Bush's mind at the recent APEC summit with global terrorism as the number one
item on the agenda and the nuclear aspirations of North Korea in second place.
With the US needing China's support on both issues but with a key brokering role
to play on the latter, having Taiwan on the agenda as well would not have been a
It is not surprising then that if Taiwan had expected the United States to show
a more forthcoming position at APEC, it was destined to be disappointed. In his
meetings with Chinese President, Hu Jintao, Mr, Bush reiterated yet again
Washington's one China policy and opposition to Taiwan's formal independence.
Economic performance the best since 1997
Taiwan's economy has done well this year - some say that this is in spite of
the government. Certainly, the present administration appears to have learned
its lesson and is taking a more laid-back and less interventionist approach to
economic management. With the economy steaming ahead at its fastest clips, since
1997, when the island powerhouse turned in an expansion rate of 6.37 per cent,
the government has revised upward its forecast for the current year.
Taiwan's economy turned in a pleasing third quarter result. Continued strong
export demand, coupled with a firming of private investment pushed Taiwan's
domestic economy to an expansion rate of 5.27 per cent year-on-year in the third
quarter. The result, while better than many had expected is a slowdown from the
7.88 per cent recorded in the second quarter of the year. Nevertheless, as a
result of the third quarter figure, the government has raised its growth
projection for 2004 as a whole to a robust 5.93 per cent.
Third quarter exports (July-September) expanded by 15.1 per cent while imports
rose by 17.4 per cent. For the year as a whole, a 20.9 per cent expansion is
predicted although next year, the full year expectation is for only a further
7.4 per cent increase.
Private investment rose by 26.4 per cent year-on-year in the third quarter
thanks to strong demand in the semiconductor and liquid-crystal-display sectors.
For the year as a whole an expansion of investment of 24.9 per cent is currently
forecast. However for 2005 a more modest 9.3 per cent is forecast.
Export orders at a record high
Exports fulfilled in October increased by 17.5 per cent year-on-year to
$15.39 billion and this was the second highest level on record. Imports surged
to $15.05 billion - the highest ever - and up by 38.1 per cent from a year
earlier. The October trade surplus amounted to $341.2 million. Imports of
capital equipment were valued at $3.31 billion and were up by almost 39 per cent
on the same month last year.
Export orders received were at a record high in October to $20.25 billion and
were up by an estimated 25.46 per cent on previous. This beat the previous
record set in September when orders rose by an annualised 26.61 per cent from a
year earlier to $19.4 billion. For the first ten months of the year export
orders have risen by 26.17 per cent to $175.54 billion.
Industrial output in October expanded by 2.91 per cent and slowed from a revised
8.22 per cent increase recorded in September. Electronics orders topped demand
growing by an annual 31.21 per cent in October to US$4.46 billion. Consumer
electronics items were top of the list. Industrial output for the first ten
months of the year has risen by 11.48 per cent as compared to the same period
Nevertheless export growth is expected to slow to around 12 per cent by the end
of the year and easing back further into single-digit expansion by first quarter
Jobless rate hits three year low
Taiwan's jobless rate fell to 4.31 per cent in October from 4.50 per cent in
September. On a seasonally adjusted basis the rate fell to 4.22 per cent from
4.35 per cent. The October 2004 result represents the lowest since May 2001 when
the jobless rate fell to 4.22 per cent.
According to government figures, fewer businesses closed during October leading
to a lower number of layoffs. At the same time, seasonal employment picked up as
factories rushed to complete end-of-year orders.
Inflation remains under control
Taiwan's consumer prices rose by 2.36 per cent year-on-year compared to a
revised rate of 2.77 per cent in September. The wholesale-price index increased
by 12.02 per cent in October compared to a revised 11.39 per cent rise in
September. Higher oil prices were held chiefly responsible for the increase. The
core inflation index, which excludes volatile prices such as food and energy,
was up by 0.92 per cent in October. For the first ten months of the year,
Taiwan's CPI rose by 1.62 per cent; the WPI by 6.97 per cent and the core
inflation index rose by 0.67 per cent.
Yet a slowdown is in the pipeline
Yet, here as elsewhere in Asia, signs of a slowdown are emerging, especially
in the export and investment sectors, both of which are expected to slow
substantially in 2005 but also in private consumption growth also.
Taiwan Growth Forecasts
Investment into manufacturing 55.30% 18.00%
Private consumption growth
With the Chinese Yuan continuing to be pegged to the US currency, the recent
rise in the New Taiwan dollar against the US dollar and by association, the
Chinese yuan, is starting to affect Taiwan's export competitiveness. This is
flowing over to affect investment decisions and there are growing fears that
local businessmen may, in the months ahead, be less willing to invest. The NTD
recently rose to a 44-month high of NT$32.554 against the US dollar and has
appreciated by around 4.4 per cent so far this year.
For 2005 the current forecast of government agencies is an expansion of GDP by
around 4.56 per cent.
High Court upholds contested election result
Taiwan's high court has finally upheld President Chen Shui-bian's contested
victory in March elections. Opposition leaders filed a lawsuit following that
election, accusing the president of staging his own botched assassination one
day before the vote and other irregularities.
The Taiwanese high court dismissed all charges of gross fraud and vote tampering
in March's presidential election. The lawsuit, one of two contesting the ballot,
accused President Chen Shui-bian of planning his own election eve shooting to
win extra votes. The suit also claimed the president illegally held a key
referendum on Taiwan's relations with China on Election Day. The court rejected
the claim. The verdict comes after seven months of legal challenges, ballot
recounts, intense debate and sometimes-violent political confrontation.
Meanwhile a second lawsuit is still moving forward, this one challenging the
election commission's decision not to suspend the vote after the shooting.
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