Media outlets are now reporting that Taiwan will produce 300 cruise missiles at the order of President Ma. Perhaps it is for defense, but certainly for an economic stimulus as the local economy appears headed for a recession.Taiwan's leading economic indicators are pointing to a recession as the total indicator monitoring score fell to 12 points, a level not seen since December 2001, according to a report released Monday by the Council for Economic Planning and Development (CEPD).With economic indicators falling, the CEPD does not believe we will be out of this hole until the second half of next year, assuming this is an ordinary recession with a 12-15 month lifespan. The recession is affecting many Taiwanese industries. For example, our machine tool industry, one of those key industries you never hear about, is suffering from Korean competition as the won has plummetted, making Korean machines cheaper for overseas buyers, and leaving Korean buyers without the cash to buy Taiwan machines. The industry is considering moving into higher-end machines to compete with Japan. Think the financial mess in Iceland, where the currency's collapse has devastated the economy, won't affect Taiwan? The Iceland deluge has smacked 16 Taiwan firms. It's amazing to think that on May 20, 2008, the local stock market index spiked at over 9000, while today it was around 4400, levels not seen since the recession of 2001-2....
In the wake of an actual apology from China, the melamine scandal continues to ramify as Pingtung bakeries are dying off. There had already been a wave of closings among bakeries around the island after the flour price rises last year, but the melamine scandal hit both milk powder and then chemicals used to make flour rise, driving customers away from local bakeries. The DoH banned all protein imports from China.
Speaking of economics, the recent death of widely revered tycoon Wang Yung-ching has invariably been presented as a rags to riches morality play in the media. It makes a nifty narrative, but the reality is that Wang got his start like so many greatly wealthy people: subsidies and connections. Wang was a US AID baby, one of a group of local entreprenuers selected from among local businessmen under a US policy to encourage capitalism and locally-driven economic growth in Taiwan. Wang (who had seen the potential in plastics) and his mainlander partner T.T. Chao were basically handed a polyvinyl chloride plant by the US mission and told to run with it. And the rest was history, as they say, from which the US role has vanished.
But don't worry, the economy is going to be OK as Taiwanese entreprenuers are always inventive in finding new markets. For example, more than half the convenience stores tested by a consumer foundation sell cigarettes to minors....
[Taiwan]
Korean firms can't have it both ways. You can't say, hey look they can't afford precision machine tools from overseas (they don't necessarily have much in the way of domestic suppliers), but their product is cheaper overseas. It means short-term they'll have better looking profits, but in the long-term, they're not buying equipment they obviously need...
ReplyDeleteBut the whole source of this crisis was Koreans borrowing way too much cheap money from overseas. That means that even export-driven firms aren't necessarily benefiting from a lower won. They borrowed huge amounts of yen, meaning they are making more money in terms of won, but they have to return their loans in terms of exploding costs of yen.
Taiwan's firms are suddenly much more competitive with Japanese firms in price because the yen has exploded. But again, there's the capital expenditure problem which long-term means Japan can, if they need to, buy capital equipment from overseas at very low prices compared to Taiwanese firms.
I'm expecting a round of "but it's not my fault" handwringing from Ma. In all fairness, he is not to blame for the recession, but it will be fun seeing him squirm. Who wants to bet that he uses the eventual economic recovery to show his China policies are working?
ReplyDeleteHere is another nice one....
ReplyDeletehttp://www.taiwanheadlines.gov.tw/ct.asp?xItem=139038&ctNode=10
Taipei health officials find meat in vegetarian products
Taiwanese - Always ahead of the game....
Maybe Ma has finally realized that giving-in to everything China desires is not the best negotiation strategy? Maybe I'm too optimistic there, but in any case having these 300 missiles should be a good deterrent against Chinese military aggression.
ReplyDeleteI'm quite impressed with how consistenly wrong Ma can be on the economy. Let's face it, most people's economic predictions are usually wrong, but this man nails it every time.
ReplyDeleteIn order to be proved right about something he recently made that bold claim that there won't be a war during this term.
Wow! There wasn't a war when the last two presidents were hated by the CCP for 20 years......He's really sticking his neck out there.
I can picture the campaign in 2012.... Tsai Ying-wen will be trying to point out the failed promises on 633, the stock market, the recession, sovereignty, international space, press freedom, an independent judiciary...All we'll hear is 'The man said there wouldn't be a war. He's a visionary'
thomas,
ReplyDeleteIt's still a long ways out, but I'm highly suspect of any "economic recovery" anytime soon, even within the next 3 years. We're not in any ordinary recession right now, this one is different. I guess I'm mainly talking about the U.S. economy, but seeing how connected all the economies of the world are now, it'll be hard to decouple the U.S. economy from say, Taiwan's economy. A similar "Lost Decade" like Japan has had, can also be said for the U.S. now. Pretty much any buy and hold investors in the market since 2001-2002, are back to where they started, if not lower.
Duh! Invest in Taiwan.
ReplyDeleteRichard, we are actually in agreement. I think any "recovery" will take place at the end of next year at the earliest. I was saying that when a recovery happens, as it almost certainly will during Ma's term, Ma will try to make it look as though his China policies are partly to thank as Ma has not yet admitted that he has F-ed up on anything, despite some royal F-ups. It might be three years from now, but you can bet that he will try to give himself some credit. This makes the effort all the more ridiculous. That's all I was saying.
ReplyDeleteThomas, no doubt we are in agreement, especially on Ma. :)
ReplyDeleteBlame the DPP/CSB for the previous and current economic troubles, and take credit for the future recovery, if/when it ever happens.