Taiwan's Trade Surplus Falls by Half on Global Economic Slump

T he financial storm enveloping the world has cast a recessionary pall over the European and American economies. Japan's economy remains in a rut. Even mainland China has been feeling the slowdown: its year-on-year GDP growth slipped to 9% in the third quarter, out of double digits for the first time in three years. Taiwan, meanwhile, estimates its YOY GDP growth at just 3.04% in the third quarter, well below the full-year forecast of 4.3%.

On the trade front, Ministry of Finance figures issued on 7 October showed September exports relatively flat in US-dollar terms, down just 1.6% from the same period last year, whereas imports grew by 10.4%. Thus Taiwan's trade surplus declined to US$810 million in September, down 74.3% from last year. The surplus for the year through September was only US$8.47 billion, or less than half its level for the same period last year.

China (including Hong Kong) is Taiwan's top export destination. Exports to China for the January-September period were worth US$82 billion, or more than 40% of Taiwan's total exports. Most consisted of Taiwanese firms selling to themselves-shipping key parts and components to China for assembly and re-export.

Excessively dependent on the mainland market, Taiwan saw its industrial production climb by just 0.4% in August and its September exports to China fall 16.3% from last year's level due to the ongoing global financial turmoil. But Taiwan has continued to post significant growth in direct exports to the US, Europe and Japan.

Taiwan is the world's 17th-largest trading nation. We have the world's fifth-largest foreign-exchange reserves (US$281.1 billion at the end of September) versus less than US$100 billion in foreign debt. In addition, the non-performing-loan ratio of our banks stands at a very low 1.53% (end of August). While we have remained largely unscathed by the global financial crisis, the global economic slowdown means it will be some time before Taiwanese firms are feeling flush again.

Taiwan's external trade

September

January-September

Amount (YOY change)

Amount (YOY change)

Exports

21,849.8(-1.6%)

204,478.3(+14.5%)

Imports

21,039.5(+10.4%)

196,009.6(+21.6%)

Surplus (deficit)

810.3 (-74.3%)

8,468.7 (-51.4%)

Exports to major trading partners