Taiwan Regains Trading Strength

Taiwan's trade performance has recovered along with the global economy, and the island's exports and imports are expected to continue thriving in 2004. Statistics recently released by the Ministry of Finance (MOF) show that two-way foreign trade reached new record highs last month, with exports registering US$13.83 billion (up 16.2% from the same month of 2002) and imports US$12.39 billion (an increase of 32.6%), for a surplus of US$1.44 billion. Taiwan's trade has been in surplus every month since March 2000.

Hsu Kuo-chung, director of the MOF's Department of Statistics, reported at the time of release that Taiwan's direct exports to mainland China last month accounted for 18.2% of all exports, outpacing shipments to the United States for the first time and coming second only to shipments to Hong Kong at 18.4%. Exports to the mainland and Hong Kong together reached US$5.07 billion in November, for a 36.7% share of the total—another historic high.

In fact, an official of the Board of Foreign Trade (BOFT) of the Ministry of Economic Affairs has noted, a significant portion of Taiwan's exports to the mainland actually go via Hong Kong. This means that the island's manufacturers are actually far more dependent on the mainland than the customs figures indicate.

This growing dependence, the MOF's Hsu cautioned, might lead the island's manufacturers into an area of risk given the uncertain nature of the mainland's political climate.

In terms of two-way trade, Hong Kong, mainland China, South Korea, Europe, and the Association of Southeast Asian Nations (ASEAN) have become more and more important to Taiwan in recent years. Japan and the U.S. have each respectively been Taiwan's biggest trading partner in the past for long periods, but those markets have gradually lost their charm for Taiwanese manufacturers because of their prolonged economic recessions, particularly that in the U.S.

Taiwan's exports to Japan increased by 5.6% and its imports from that country soared by a whopping 50.1% last month. At the same time, shipments to the U.S. declined 7.6% and imports rose 5.5%. Some observers attribute the decline in exports to the U.S. to the recent recession in the market there for information technology (IT) and telecommunications products.

Taiwan's import growth in November, Hsu said, was due to massive imports of agricultural and industrial raw materials (up 38%) and capital equipment (up 29.1%). The capital equipment was imported mainly for the IC, electronics, and optoelectronics industries, while the agricultural and industrial raw materials consisted mainly of crude oil and cereal grains. Growing imports of raw materials usually imply that industry will continue to expand in the coming year.

The island's exports have grown at a double-digit rate every month since August this year, reflecting the recovery of the island's manufacturing power. Exports are expected to amount to US$13.2 billion in December. The MOF predicts that export growth for the year as a whole will be in the 9.6-9.8% range, while import expansion is expected to reach 11.6%. Both are better than earlier forecasts of 9.3% and 10.2%, respectively.

Exports in the first eleven months of the year were up 9.5% from the same period of 2002, with shipments to Asia expanding 14.5% and those to Europe growing 9% while exports to the U.S. and Japan dropped 4.1% and 1.3%, respectively. The import increase for the 11-month period amounted to 11.1%, with purchases of agricultural and industrial raw materials growing 16.3% and those of consumer products rising 5.9%. Imports of capital equipment were down by 2%.