In the late 2015 or early 2016 to be precise, Taiwan’s economy was tackling with a disturbing recession as growth in the GDP ( Gross Domestic Product ) fell into the negative territory for the first time in the six years. There were growing concerns over the long term prospects of the export heavy nation. Fast forward to today, estimates suggests that Taiwan’s GDP will have outpaced its neighboring superpower for the first time in 30 years. The island nation ended the year as Asia’s top-performing economy in 2020.
November saw export orders jump by 29.7 percent—the biggest increase since May 2010—to a record high of $57.8 billion. Much of this strength can be attributed to strong global demand for semiconductors, telecommuting products and electronics, including smartphones, which grew 23.9 percent during the year, according to Taiwan’s Ministry of Economic Affairs. But the ongoing trade war between the United States and China is also playing a major role in Taiwan’s economic recovery, the nature of US trade policies towards China in large part explains why its trade surplus with the US has been on the rise. Many Taiwanese factories that manufacture products for the US market having once been located in China, US-Sino trade unrest is now pushing those companies to redirect their production back to domestic shores. Between January 2019 and September 2020, more than NT$1.1 trillion ($38 billion) of Taiwanese investment had returned home, according to Economic Affairs Minister Wang Mei-hua, with tech-manufacturing heavyweights InnoLux, Accton Technology and Quanta Computer among those building new factories in Taiwan.
Mei-hua confirmed that supply chains for electric-vehicle manufacturers, including Tesla, are heading to Taiwan to set up production facilities and signaled that much of the recent restoring comes on the back of intellectual-property concerns being expressed by US customers. “its upstream companies that determine the direction of Taiwanese investment,” Roy Chun Lee, deputy executive director of the Taiwan WTO & RTA Center at the Chung-Hua Institution for Economic Research, told The Straits Times newspaper in September. “The general trend is the creation of a second-track supply chain that is less reliant on China.” In October, the government confirmed that it had drawn in nearly 700 companies to invest in Taiwan since late 2018 and expects to have amassed investments of more than NT$374 billion ($13 billion) in 2020, thus contributing around 1.7 percent towards economic growth.
“So long as Washington retains a strong military position along the first island chain, regional powers—from Vietnam to Taiwan to Japan—will try to resist China’s rise rather than accommodate it,” Biden’s national security adviser, Jake Sullivan, wrote in May 2020, with regards to the trade war, there are many signs the new president will take a more multilateral approach towards its Asian economic rival.
The Taiwan government’s Directorate-General of Budget, Accounting and Statistics expects GDP to grow by 3.83 percent in 2021, with few other countries set to register positive growth. With the waves hitting important export markets including the US and Europe, the demand for Taiwan’s tech products is expected to remain robust through the year. According to the US Department of the Treasury, countries must have at least a $20 billion-plus bilateral trade surplus with the US, a foreign currency intervention of more than 2 percent of GDP and a global current account surplus of more than 2 percent of GDP to be classed as a manipulator. Taiwan’s trade surplus with the US was $23 billion in 2019, and its current account surplus was a whopping 10.5 percent of GDP. This made them to add Taiwan into the ‘monitoring list’.
“We hope to cut the trade surplus with the United States, this is the long-term solution. Yen Tzung-ta, the central bank’s deputy governor, acknowledged. With the Taiwanese dollar having strengthened by around 6 percent in 2020, this may be easier said than done. Few countries are in a more comfortable position economically than Taiwan at present.
“2020 has been a record year for Taiwan, and we expect the star to continue shining.” As Barclays APAC (Asia-Pacific) regional economist Angela Hsieh recently noted.