Wednesday, March 11, 2009

WSJ on our crumbling economy

Ting-yi Tsai and Ian Johnson at WSJ write on our failing economy, with exports down again for the sixth straight month:
Plummeting exports to China, underscored by new figures issued Monday, are adding to doubts in Taiwan about the island's recent strategy for closer ties with its neighbor and longtime rival.

Taiwan said exports in February plunged 28% from February 2008, the sixth consecutive monthly decline and a bigger drop than many analysts had predicted. For the first two months of the year -- which economists consider a useful gauge because the Lunar New Year holiday fell in different months this year and last -- total exports fell 37.2%, led by a 50% drop to China, the biggest buyer of Taiwanese goods.
And more....notice how neatly they wrap up the desires of the Taiwan public and the goals of Beijing in that first paragraph. Lots of people write as if Beijing has no political goals:
China has embraced Mr. Ma's administration as one of the best bets recently for closer economic ties, which China hopes will lead to political unification -- one of Beijing's most important national goals. Last week, Chinese Premier Wen Jiabao, in his annual address to China's legislature, said ties with Taiwan had improved and that his government hopes for a peace treaty. In response, Taiwan said Monday it aims to set up an organization to evaluate military contacts with China.

But more Taiwanese are losing faith that closer relations with China will strengthen their economy. A December poll by Taiwan's Mainland Affairs Council, the agency that handles China policy, showed 37% of the public thought the opening up toward China has been too fast, more than double the 18% in March 2008.

Mr. Ma's China policies "haven't shown any substantial benefit at all," said Chang Chuan-hua, a 33-year-old travel agent.

Nearly a fourth of Taiwan's exports go to China, which is growing faster than other major economies. But many of those exports are goods that are processed and re-exported to the U.S. or other end markets. Some economists say China is starting to replace Taiwanese electronic components with ones produced domestically, thus exacerbating the decline in Taiwan's exports to the mainland.

Compared with the 50% drop to China, Taiwan's exports to Japan fell only 14% and those to the U.S. fell 25.7%.

As one economist cited in the article pointed out, the problem is overreliance on both exports and on China.

The test will be to see if the public can connect our failing economy and the poor performance of the legislature, which appears to be insulated from public ire because the people prefer to blame the President. It will also be interesting to see if the public connects at the local level and votes against the KMT in the year-end elections for city and county councils and mayors.

Meanwhile, in local bailout news, the Taiwan Memory Company, launched to save the chip industry here, is seeking nearly US$900 million in government bailout funds. Of course, TMC is not a bailout plan, no sirree, move along folks, no bailout plan here:
He said that TMC was not a short-term rescue program. Its goal was to help Taiwanese DRAM companies stay alive and turn a profit in three years by helping enhance their technological competitiveness, he said.

TMC was a revitalization plan for the DRAM industry, not a consolidation plan or a merger plan, which was what most investors and industry analysts had expected, Hsuan said.
Chronic overcapacity in the industry needs to be addressed internationally, or the industry will simply require a permanent IV drip of ever-larger subsidies....

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Anonymous said...

This is giving me hope in my "best case scenario" following the election.

The Ma administration's cozying to China may actually finally dispel the myth that China is the answer to Taiwan's problems. The KMT has been peddling the Greater Chinese notion for 10 years as its grip on Taiwanese political power waned for a decade.

Now lets hope this will signify the pendulum swinging the other way and Taiwanese realizing that Taiwan is the center of its economic and cultural life.

cfimages said...

There seems to be an awful lot of "Mr Ma" in that article. I expect that from China, but surely the WSJ could address him as President Ma.

Feiren said...

The Wall Street Journal refers to Obama as Mr. Obama on second references. This is standard journalistic practice. No slight here, I think.

SellCivilizationShort said...

Overcapacity is the problem? Okay. What's the solution - perhaps building up domestic demand? How? For what industries?

Thomas said...

"It will also be interesting to see if the public connects at the local level and votes against the KMT in the year-end elections for city and county councils and mayors."

I would hope so, however, I really think that it might not pan out as well as some hope. It is really bugging me that the DPP is not making a strong enough case that they could do better on anything besides cross-strait relations. The upcoming elections need to be about more than "I'm not the other guy," especially since disgust with how the DPP were running things, deserved or not, was a big reason why they lost the last two.

cfimages said...

Thanks for the clarification Feiren. WSJ is not on my usual reading list.

Dixteel said...

I am pessimistic about the local election...just my gut feeling. The WSJ is quite right. The economic trouble and the recent action of Ma government has dispell the many mythical equations such as "economy == China" and "KMT == economy" for many people. But I don't think there are enough. Many are still hiding their heads under the sand Some are systematically "bribed" by KMT, and will vote for KMT regardless the situation.

The KMT and its tight grasp of Taiwan can only be loosen when more people realize the situation.