Taiwan’s President Tsai Ing-wen has publicly stated a few days ago that Taiwan’s economic performance is “returning to the top of the four dragons in Asia”. This argument attracted attention again in Taiwanese public opinion.
Tsai Ing-wen mentioned in the Double Ten’s speech that in the face of global economic changes, Taiwan has embarked on a new economic route that no longer relies on a single market.
The “Four Little Dragons in Asia” refer to the four rapidly developing economies in Asia from the late 1960s to the 1990s: South Korea, Taiwan, Hong Kong and Singapore. After the Asian financial turmoil in 1997, with the development and changes of the international economic situation, this term has been seldom used. From the perspective of GDP per capita in 2020, the four Asian tigers have all entered the list of developed economies.
According to statistics from Taiwan’s Executive Yuan, Taiwan’s economic growth rate was 8.31% in the first half of 2021, higher than Hong Kong’s 7.8%, Singapore’s 7.7% and South Korea’s 3.9%. Taiwan’s Executive Yuan estimates that Taiwan’s total economic growth rate this year is 5.88%, which has a chance to break through 6, and it has become the top economic growth rate of the four Asian Tigers for two consecutive years.
However, there are also critics who pointed out that the domestic epidemic in Taiwan in May this year has severely hit Taiwan’s domestic demand economy, such as the entertainment or catering industry has not yet recovered. In addition, Taiwan’s economy is too dependent on a single industry, and wage earners in other industries are still suffering from low wages. .
Dr. Zhu Yuezhong from the Department of Finance and Economics of Nantai University of Science and Technology in Taiwan analyzed to the BBC in Chinese that although Taiwan has been hit by the epidemic this year and domestic consumption has suffered setbacks, the traditional manufacturing and machinery industries have grown better than the electronics industry and “performed very averagely.”
In response to criticisms of low wages, Taiwan’s Ministry of Labor announced this week that it decided to increase Taiwan’s statutory minimum basic wage from the current monthly salary of NT$24,000 to NT$25,250 (approximately US$897), and the minimum hourly wage from NT$160 to NT$168. It is expected to be implemented on New Year’s Day in 2022.
The growth rate ranks first among the “Four Little Dragons in Asia”
The four Asian tigers all transformed from agriculture and light industry in the 1970s and gradually grew into developed economies. The four economies have competed with each other for decades and have become the locomotive of economic development in Southeast Asia and East Asia, and have also become an important reference for developing countries in Latin America to strive for economic transformation.
However, with the acceleration of the global economy, the rise of China and the Asian financial turmoil, with the exception of these four economies, people from all walks of life are less likely to compare the four dragons together. Some analysts pointed out that this topic was raised this time because the Taiwan government hopes to use the National Day speech to promote several important economic policies of the Taiwan government in the past few years.
In terms of economic growth rate, Taiwan’s growth rate from 2019 to the first half of this year surpassed the other three economies. In addition to Taiwan last year, the other three economies all showed negative growth due to the impact of the new lung, and Taiwan still had a growth rate of about 3%.
In his speech, Tsai Ing-wen said that the main reason for Taiwan’s economic growth is to no longer rely too much on a single Chinese market, which has diversified risks in the context of the US-China trade war. “We have taken a new economic route that no longer depends on the single market. This is the key to Taiwan’s economy being able to gain a foothold in the world and play a more important role.”
According to statistics from Taiwan’s Executive Yuan, Taiwan’s merchandise exports in the second quarter of 2021 increased by 37.35% year-on-year (denominated in U.S. dollars). Among them, the export of electronic components and components, which accounted for the highest proportion, increased by 31.09% year-on-year, the export of information communication and audio-visual products increased by 28.74%, and the export of mechanical products increased by 27.44%.
However, if you compare the total GDP, Taiwan is not the first of the four little dragons, but South Korea has always been far ahead, and Taiwan is closely behind. In addition, Singapore leads in per capita GDP, and Taiwan is the last of the four little dragons.
In fact, the competition between the four little dragons in various economic indicators has always existed. They have lost and won each other, and the key to their competition now comes from their connection with the world’s second largest economy, which is the Chinese market. .
Get rid of the Chinese market?
Although Tsai Ing-wen emphasized in his speech that Taiwan’s economy is free from the single market, the market connection between Taiwan and China is still deep.
According to Taiwan’s official statistics, in 2020, Taiwan’s exports to China (including Hong Kong) accounted for 43.9% of Taiwan’s total export value, setting a record for the proportion of the last ten years.
According to analysis and interpretation, Taiwan’s bulk exports are “electronic components” (mainly semiconductor chips), and Chinese manufacturers such as Huawei have great demand for chips produced by Taiwan’s foundries. It can be said that the markets on both sides of the strait depend on each other.
However, in order to reduce its reliance on the Chinese market, the Taiwanese government has introduced a southward policy since the time of Lee Teng-hui, hoping that Taiwan’s industries can diversify investment to Southeast Asia, including Indonesia, Thailand, and Vietnam. However, with the rise of China, millions of Taiwanese businessmen went to the mainland to set up factories. After Ma Ying-jeou took office and joined the promotion of regional integration between Taiwan and mainland China, the push for the southward policy gradually slowed down. After the DPP returned to power in 2016, President Tsai Ing-wen accelerated the encouragement of Taiwanese businessmen to move to southbound countries or return to Taiwan with the “new southbound policy”.
Lin Xiaru, a researcher at The Brookings Institution in Washington, once pointed out to the BBC Chinese analysis that despite Tsai Ing-wen’s proposal of a new southbound policy, Taiwan’s share of trade with the Association of Southeast Asian Nations (ASEAN) has changed from 2017’s 16% fell to 14% in 2020. Observing Taiwan’s economy, in addition to the new southward policy, Lin Xiaru therefore emphasized that how to innovate Taiwan’s industries and how the government assists enterprises to invest in global marketization are difficult but important tasks. On the other hand, there are still too few companies willing to train bilingual talents and connect the industry to the world.
K-shaped growth crisis?
In recent years, Taiwan’s major semiconductor manufacturers, such as Taiwan Semiconductor Manufacturing Co. (TSMC), have grown rapidly. The global chip shortage caused by the US-China trade war and the new crown epidemic has caused the semiconductor industry’s global economic strategic position to rise sharply, and it has also driven internally. Taiwan’s stock market turnover has repeatedly broken records, and the semiconductor industry has been called the backbone of Taiwan’s economy. However, many criticisms have also begun to emerge.
Lin Zujia, a Taiwanese economist and current director of the Kuomintang’s Mainland Affairs Office, wrote an article criticizing the Tsai government, saying that its economic strategy has allowed Taiwan’s economy to grow in a K-shaped manner. The rich get richer and the poor get poorer. The so-called K-shaped economy means that a part of the economy or industry rebounds and continues to grow, while the other part continues to go down, forming a bifurcation trend, like the English letter “K”, which has recently been used by economists to explain the desperate desire of the US economy. When recovering from the new crown epidemic, there are industries that have skyrocketed, but there are also many industries that continue to plummet.
Lin Zujia believes that Taiwan’s economic leader in electronics-related industries employs less than 1 million people, “only 30% of the total manufacturing industry, while the other manufacturing industries that are still struggling with hard work employ nearly 2 million people, accounting for nearly 70% of the total manufacturing industry. , I can’t be happy at all. Some of these industries are growing rapidly, while other industries are experiencing severe decline, which is the standard K-shaped growth.”
Other critics also believe that Taiwan’s over-reliance on a single high-paying, high-polluting electronics industry has caused a widening gap between the wages of Taiwan’s labor and the rich. Some analysts say that the wages of employees in Taiwan’s traditional manufacturing industries and other related small and medium-sized enterprises have been stagnated for a long time since 2000.
However, Zhu Yuezhong analyzed to the BBC in Chinese that according to Taiwan’s Ministry of Economic Affairs, Taiwan’s basic traditional industries including metals, plastics, chemicals, and steel have actually increased their export growth rates this year than the electronics industry. “The electronics industry is just ordinary.”