TIER: Taiwan's manufacturing sector sees growing mainland threat

Taipei, Dec. 9, 2003 (CENS)--The index of economic impact of mainland China on Taiwan's manufacturing sector stood at 13.03% last year, up 0.9 of a percentage point from 2001's 12.31%, according to a research report recently released by Taiwan Institute of Economic Research (TIER).

TIER explained that the impact index is the rate of Taiwan's export decline resulting from the mainland's boycott of the island's shipments. TIER has been commissioned by the Ministry of Economic Affairs (MOEA) to do such a study for more than 10 years, finding that such an impact index has been trending upward. TIER urged Taiwan's manufacturers to pay close attention to the risk of their growing reliance on the mainland as an export market and the relevant industrial linking effects.

Last year Taiwan's exports to the mainland rose to account for 29.09% of the island's total outbound shipments, up 6.76 percentage points from 2001's 22.33% and 11.84 percentage points from 2000's 17.25%. The corresponding ratio for the first nine months of this year soared to about 34% and is expected to rise further by the end of the year.

Of individual industries, the precision machinery industry saw 34.29% of its exports destined for the mainland in 2002, followed by base metal with 30.17%, chemical materials 28.78%, machinery repair and maintenance 22.06%, non-metal mineral products 21.61%, chemical products 21.29%, pulp and paper making 19.54% and textile 15.20%.

TIER warned that the higher the ratio for any industry's exports to the mainland, the higher the risk the industry might take. The mainland's manufacturing industries have in recent years been growing very rapidly, and have threatened their counterparts in the world, particularly those in Taiwan. Today most of Taiwan's traditional manufacturing industries have gradually lost their competitiveness to their counterparts in the mainland.

Although Taiwan's high-tech industries, including semiconductors, display panels, computers & related parts, and electronic products, are still ahead of those in the mainland in terms of technology, yet the gap is narrowing.

TIER suggested that Taiwan's manufacturing industries, both high-tech and traditional, should expand their leading gap and keep core technologies at their R & D centers in Taiwan, so that they can protect themselves from the mainland's rising threat.