Academia Sinica president Lee Yuan-tseh electrified Taiwanese society during the presidential election when he threw his support to Chen Shui-bian and proclaimed: "Taiwan faces a choice. Do we want to lift ourselves up, or let ourselves sink into the mire?" These words ring equally true today, albeit in a different context. Again we find ourselves at a key crossroads, this time in the economic sphere.
In the political, economic, and social arenas, the ROC is heading into a momentous period of transition, and it is the people of the nation who will decide whether things get better or worse.
While the president in late May was traveling abroad and raising Taiwan's international profile, bad news was breaking at home. The exchange value of the New Taiwan Dollar declined sharply, the latest leading economic indicators dropped off the bottom of the scale, and unemployment hit a record high. For most people, leading economic indicators may seem like an abstraction, but the depreciation of the NT Dollar has hit much closer to home because it quickly leads to inflation and erodes our purchasing power. Although the cabinet has introduced measures to boost the economy, these may or may not have the desired effect. The current economic slowdown is due mainly to a lack of confidence, and until we regain it, these measures are unlikely to make much difference as long as businesses and individuals do not respond in the manner hoped for.
When I was little my mother would warn me not to say negative things. And we have an old saying in Taiwanese: "Say you're unlucky, and you'll be unlucky." This is not just superstition. It is a reflection of the impact that psychology has upon our affairs. If we constantly complain about economic recession and unemployment, consumers won't consume and investors won't invest. Falling consumption and investment then confirm our pessimism about the economy. Economists call this "negative expectations." Isn't that just another way of saying that talking about bad luck brings bad luck?
Of course, we're not urging anyone to go out and spend their money frivolously, and we certainly don't mean to whitewash real problems. We simply mention the above as a reminder that it is necessary to observe events dispassionately. From a macroeconomic perspective, in assessing the causes of Taiwan's economic slowdown and evaluating the government's responses, we have to have a global outlook. And then there is the microeconomic perspective. How does one handle one's family matters and personal finances? How do we maintain our emotional equilibrium? All these decisions must be made by individuals.
Let's take a look at the state of Taiwan's economy before it started slowing down in the 4th quarter of 2000. Taiwan's foreign trade in 2000 posted its fastest growth in nearly a decade, with imports up 26.5% and exports up 22%. In contrast, share prices on the Taiwan Stock Exchange fell steadily over that same time period. A lack of confidence, not economic problems, appears to be the cause.
Second, Taiwan's biggest trading partner, the US, went into an economic slowdown beginning in the 4th quarter of last year. The growth rate fell to an annualized 1.4%, which has affected Taiwan's exports. Taiwan's economic slowdown is part of a global pattern. Readers may be aware of the big layoffs that have taken place at many leading US corporations, including Boeing and Cisco. Taiwan is an important player in the global economy, and the decline of our economy is closely related to global conditions.
The Council for Economic Planning and Development recently adopted a plan to boost domestic demand, but businesses will have to give their full support if this plan is to do any good. Business, government, and academia will have to work together to carry out needed reforms. In this issue of Sinorama we introduce our readers to Vice Premier Lai In-jaw. He has worked hard all his life, and achieved much, thus setting an example for us all. Lai has stated that the government needs the support of academics, the business community, and the general public. He also said that the government needs to adjust Taiwan's industrial structure, and must keep international conditions in mind as it does so. Moreover, said Lai, resources must be put to the best possible use, and we must seek to identify areas where Taiwan can be most competitive in the future. He mentioned the service sector (which now accounts for 60% of Taiwan's GDP) and biotechnology as promising economic sectors.
We decided to devote our special feature this month to the investments of Taiwanese businesses in mainland China, with which Taiwan has enjoyed annual trade surpluses of well over US$20 billion in recent years. We focus especially on the question of why Taiwanese high-tech manufacturers are moving offshore, and how they manage to keep afloat in the fiercely competitive market of the greater Shanghai region. It is a tricky market, and caution is of essential.
Taiwan has become an important part of the international community, and we must not lose heart on account of our current problems. In the past century we've gone from third-world nation to economic powerhouse. We can shake off our difficulties and create yet another economic miracle. The crisis that is pushing us to make reforms can be the catalyst that spurs us on to new heights.
