performance has been quite impressive in a world where the global economy was
hit hard by the COVID-19 pandemic. Under such context, Taiwan's economy has
performed very eye-catchingly. According to the latest data onto Taiwan's
statistics department, its economic growth rate continued to rise year-on-year
in the third quarter this year, reaching 3.33%, a steady improvement over the
previous two quarters. Indeed, compared to Korea's -1.3%, Singapore's -7%, and
Hong Kong's -3.4% during the same period, Taiwan's growth rate is not only the
highest among the four regions, but also the only region with positive growth,
ranking first among the Four Asian Tigers.
According to the
latest economic forecasts provided by Taiwan's Directorate General Budget, its
economic growth rate in 2020 is estimated at approximately 1.56%, being one of
the few economies that enjoys positive growth in the world. ANBOUND's
researchers emphasize that Taiwan is a city-state economy that is highly
dependent on external factors, while simultaneously also greatly affected by
geopolitical frictions. Under such circumstances, Taiwan's economic development
is nothing short of a miracle.
What makes Taiwan's
economy so unique while the rest of the world suffers from depression and multiple
adverse conditions? Based on ANBOUND's observations, Taiwan has done well in
several aspects, including COVID-19 prevention and control, leading in industries,
foreign investment, and foreign trade. All these, plus Taiwan's "luck" under
the impact on international geopolitics, contributed to its impressive
First, in terms of
COVID-19 prevention and control, Taiwan's authorities have avoided the pandemic
from intervening with economic activities to the greatest extent. Beginning in
March this year, Taiwan has banned residents who were at the time outside the
island from travelling elsewhere and imposed a two-week strict quarantine on residents
returning to the island. This has enabled Taiwan to avoid entering a lockdown.
Due to its timely and effective preventive and controlling measures, coupled
with the small size of the island which makes it easier to be isolated from the
outside, since April 13 this year Taiwan has not reported locally transmitted
cases for more than 200 days. So far, only 563 confirmed cases and 7 deaths
have been reported. The effectiveness of Taiwan's pandemic prevention and
control is something that is unique to the world, and it ensures that Taiwan's
local social and economic order can retain a sense of normalcy, with production
and life being basically unaffected.
In terms of the
contribution of the three major demands for Taiwan's economic growth, exports
are the main driving factor. Taiwan's excellent COVID-19 prevention and control
measures allow the factories of the island to maintain normal operations. This
is also the time when strong external demand (from masks to chips) further
drove Taiwan, which has an obvious export-oriented economy, to a V-shaped
recovery. According to statistics, in the adverse external environment, the
cumulative export value of Taiwan in the first eight months was US$ 217.38
billion, an increase of 1.5% over the same period last year. Taiwan's exports
in September reached US$ 50.03 billion, a record high in a single month, an
increase of 9.9% over the same period last year, and it even experienced a
positive increase for seven consecutive months.
Among these, Taiwan's
semiconductor industry has the greatest contributions. Due to Huawei's shipment
wave before the U.S. ban, related manufacturers' products are sold in massive
amounts abroad. According to statistics, integrated circuits alone account for
more than 30% of total exports, which is significantly higher than the
proportion of 28.5% in 2019, and has continuously set a new monthly high in
previous years. In September, the most important source of growth in orders was
still electronic products, which amounted to US$ 16.05 billion, a year-on-year
increase of 29.7%. In addition, analysts said that because of professionals working
from home under the pandemic, there are more orders for computers, monitors and
smart phones, which puts Taiwan in a particularly advantageous position in
foreign trade this year. The above-mentioned external demand has benefited
related companies a lot. Among them, the operating income of the industry leader
Taiwan Semiconductor Manufacturing Company (TSMC) in the third quarter
increased by 22% from the same period last year to NTD 356.4 billion
(approximately US$ 12.14 billion), while net profit increased by 36% to NTD
137.3 billion (US$ 4.78 billion), each hit a record high on a quarterly basis.
TSMC's net profit margin in the third quarter was as high as 38.5%, gross
profit margin was 53.9%, and operating profit margin was 42.1%, which is indeed
a miracle among the enterprises.
exports, the close economic and trade ties between Taiwan and the Mainland have
stably supported the steady development of Taiwan's economy. With the Mainland
successfully preventing and controlling COVID-19 outbreaks, the overall
stability of foreign economic and trade has formed an effective guarantee of
Taiwan's economic growth. According to statistics from the General
Administration of Customs of Mainland China, despite the impact of the pandemic,
cross-strait trade volume in the first three quarters of this year increased by
12.4% over the same period last year, reaching US$ 185.4 billion. This increase
is mainly due to the increase in Taiwan's exports to the Mainland, accounting
for nearly 80% of the cross-strait trade volume, allowing Taiwan to enjoy a
trade surplus of nearly US$ 100 billion. Taiwan-funded enterprises have reaped
considerable profits from investing in the Mainland, and the linkage between
the upstream and downstream industrial chains has played a strong role in the
economic and trade ties between the two sides of the strait. These are of great
significance for Taiwan's overall economy. Mainland China's economy is huge and
continues to grow against the trend this year; this stabilizer effect will also
be transmitted to Taiwan.
However, in recent
years, the momentum of Taiwan's investment in the Mainland has slowed down.
Under the New Southward Policy, some Taiwanese companies have turned towards
Southeast Asia to invest, and the proportion of Taiwanese investment in the Mainland
to the total overseas investment has also dropped by more than 30% in the past
two years compares with its record high 84% in 2010.
Southeast Asia, the
focus on Taiwan's New Southward Policy, has relatively good performance in
terms of COVID-19 prevention and control, as well as economic achievements, whilst
also being an important factor for Taiwan's economic stability and growth.
ASEAN is now Taiwan's second largest trading partner and second largest investment
destination. Although in absolute terms, the scale of Taiwan-ASEAN economic and
trade is still a certain distance from the Mainland, yet in terms of growth
rate, Taiwan's trade closeness with ASEAN is more than that of the Mainland. In
recent years, Southeast Asian countries like Vietnam have become increasingly
attractive for Taiwan's foreign investment. In 2018, it accounted for 6.3% of
Taiwan's total foreign investment, being one of the top 5 locations of
Taiwanese companies investing outside of Mainland and other regions.
On the whole,
despite the overall poor environment of the global economy under the impact of
the pandemic, Taiwan still has a unique developmental space in an unfavorable
environment through its own efforts, special industrial structure, technical
capabilities, and support from its external environment. All these made Taiwan
effectively avoid the impact of the pandemic, while gave full play to the
advantages of the industry and achieve better economic performance. It is worth
noting that the good performance of Taiwan's economy and leading industries
under the pandemic has provided the Taiwanese authorities economic confidence,
as well as relatively solid economic support for the political and economic
decision-making of its leaders.
Final analysis conclusion:
to its effective pandemic prevention work, competitive industrial structure,
and reasonable distribution of foreign investment, Taiwan is able to locate a
favorable external market space in an unfavorable global environment. Under the
influence of certain factors, Taiwan has achieved an economic miracle under
COVID-19. (Part of the information comes from the "ANBOUND 100+"
high-end discussion group platform).
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