|Market Profile on Taiwan|
Major Economic Indicators
Current Economic Situation
Taiwan's GDP grew only by 0.12% in 2008, down significantly from 5.7% in 2007. During the fourth quarter of 2008, Taiwan・s total exports value dropped by 25% as compared to the same period in 2007. The drop was mainly due to a weak demand for Taiwan・s machinery and electrical equipment, which generally accounted for about 45% of Taiwan・s total exports value. During the fourth quarter of 2008, the exports value of machinery and electrical equipment fell by 26%, as compared to the same period in 2007.
Outlook for Taiwan・s exports remains pessimistic in 2009, given the ongoing global economic slump. A business sentiment survey carried out by Taiwan Institute of Economic Research in December 2008, found that considerable pessimism exist among businesses in manufacturing industry and services sector regarding the outlook for the first half of 2009. According to Taiwan・s Ministry of Economic Affairs forecast in February 2009, Taiwan・s GDP growth would be -2.0% in 2009. Meanwhile, Taiwan・s National Statistics forecasts that unemployment rate would rise to 5.6% in 2009.
Since the 1990・s, Taiwan has been relocating its manufacturing activities to low-cost region, in particular to the Chinese mainland. In the third quarter of 2008, the share of GDP contribution by the manufacturing industry in Taiwan shrank to 25%, and the services sector expanded to 73%. But in absolute terms, Taiwan・s manufacturing sector has continued to grow steadily.
Taiwan・s Economic Structure in 2008
To achieve these targets, the government has determined to improve Taiwan's investment environment by enhancing the land and labour supplies as well as upgrading the infrastructure, and to provide assistance to small and medium-sized enterprises and traditional industries. In addition, the government has also determined to promote new initiatives such as wireless broadband and related items, digital living, health care and environmental protection.
Given the severity of the current global financial turmoil and the associated economic slowdown, Taiwan's Executive Yuan will submit a special budget bill for an NT$500 billion (US$14.84 billion) economic stimulus package to the Legislative Yuen by Feb 19, 2009. The plan calls for an over 4 years in infrastructure projects to bolster the sagging economy and curb unemployment.
Exports, which are a major contributor to Taiwan's economic growth, grew by 3.6% to US$256 billion in 2008. Taiwan's major export product categories include electronics, steel products, machinery, precision instruments, information and communication products, chemicals and electrical appliances. Major export markets include the Chinese mainland, Hong Kong, the US, Japan, ASEAN and the EU, which together account for some 80% of Taiwan's total exports.
Imports increased by 9.8% year-on-year to reach US$241 billion in 2008. Major imports of Taiwan include capital equipment and raw materials, with sources mainly from Japan, the US, the Chinese mainland and the EU.
Taiwan's Ministry of Economic Affairs approved inward foreign investment of US$8.2 billion in 2008, down by 46% from 2007. Finance and insurance were the largest recipients of foreign investment, which together accounted for 53% of the total foreign investment. Other major sectors receiving foreign investment included manufacturing (29%), and wholesaling and retailing (7%).
The largest foreign direct investor in Taiwan was the US, which accounted for 35% of the total inward foreign investment in 2008. This was followed by the Netherlands (20%), the Caribbean (15%), the UK (5%), Japan (5%) and Hong Kong (5%).
In 2008, Taiwan's outflow of foreign direct investment dropped by 31% to US$4.5 billion (Chinese mainland not included). The Caribbean was the leading destination for outward investment (38% of the total), followed by Singapore (16%), Vietnam (14%), the US (9%), Hong Kong (8%) and South Korea (5%). Manufacturing (42%), finance/insurance (40%), as well as wholesaling/retailing (7%), were the major investment areas.
Economic Relations with Chinese Mainland
Trade with the Chinese mainland is allowed, but according to the Taiwan's Regulations Governing Permission of Trade Between Taiwan Area and Mainland Area, all goods have to be shipped via a third place.
For investment, pursuant to Taiwan's Regulations Governing the Approval of Investment or Technical Cooperation in Mainland China, business investment and technical cooperation undertaken in the mainland by Taiwanese companies are subject to the approval by the Investment Commission of Taiwan's Ministry of Economic Affairs. But Taiwan has been gradually relaxing its restrictions on mainland investment, including such high-tech projects as production of semiconductor items and wafer fabrication, as well as investment under US$200,000. In addition, the government approved lifting the cap on mainland-bound investment to 60% of a company's net worth from the previous 40% in July 2008.
Since 2001, "Little 3 Links" i.e. direct passenger and cargo shipments between the mainland and Taiwan's outlying islands of Kinmen, Matsu and Penghu have been allowed. And since July 2008, direct chartered flights across the strait are allowed on every weekend (Friday to Monday). Furthermore, in November 2008, the mainland and Taiwan have signed landmark agreements to improve weekly direct passenger flights and cargo shipments. The agreements also aim to improve the postal services and cooperation on food safety issues.
As at the end of September 2008, Taiwan had approved a total of 37,046 projects of investment in the Chinese Mainland, with cumulative investment amounting to US$72 billion. Manufacturing industries, including those of electronic items like electronic parts, computers, electronic and optical products, metal products and plastic products, are the major targeted sectors of such Taiwan investment. Jiangsu, Guangdong and Shanghai are the major regions that receive the majority of Taiwanese investment in the mainland.
Taiwan's Approved Indirect Investment in the Chinese Mainland by Major Industry
Taiwan's Approved Indirect Investment in the Chinese Mainland by Major Region
Economic Relations with Hong Kong
Hong Kong serves as an important transshipment base for trade across the strait. About a 13% of the mainland/Taiwan bilateral trade, mainly electronics and electrical products, are re-exported via Hong Kong.
On the whole, Hong Kong's total exports to Taiwan increased by 4% year-on-year to US$7.0 billion in 2008. Major export items included semiconductors and electronic valves/tubes (31% of the total), telecommunications equipment and parts (9%), chilled/frozen meat (7%) and parts and accessories of office machines/computers (6%).
On the other hand, Hong Kong's imports from Taiwan dropped by 6% year-on-year to US$24.6 billion in 2008. Major import items included semiconductors and electronic valves/tubes (50% of the total), telecommunications equipment and parts (7%), polymers of styrene in primary forms (5%) and parts and accessories of office machines/computers (5%).
Remark: Since offshore trade has not been recorded by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.
According to Taiwan's Investment Commission, Taiwan approved 200 projects of investment by Hong Kong companies, amounting to US$367 million in 2008. Major investment sectors included trading services, finance and insurance, electronics and electrical manufacturing, wholesaling and retailing.
On the other hand, Hong Kong's inflows of direct investment from Taiwan amounted to some US$ 361 million in 2007, according to the latest figures from the Census and Statistics Department of Hong Kong.
Reflecting Taiwan's interests here, as of June-2008, 26 Taiwanese companies had their regional headquarters in Hong Kong, and another 158 had regional offices here. A further 149 Taiwanese companies had local offices in the territory to look after the domestic market here. In addition, there are over 50 Taiwanese companies listed on the Hong Kong Exchanges. Prominent examples include Yue Yuen, Foxconn, Proview and TPV Technology.