Saturday, November 15, 2008

Cargo Cult Consumer Confidence and Melamine Mayhem

The Taipei Times reported plunging consumer confidence in Taiwan, where Taiwan was one of 14 markets in Asia that saw falling consumer confidence....

In its latest report, MasterCard Worldwide found that consumer confidence in the Asia-Pacific region fell 7 points compared with six months ago, with 70 percent of the respondents saying they planned to cut back on discretionary spending in the next 12 months.

Consumer confidence in Taiwan was the lowest among the 14 markets, with 90.8 percent of consumers saying they planned to reduce discretionary spending in the next 12 months.

The report showed that Taiwan and Hong Kong were the hardest hit by the recent global economic turmoil, with Taiwan’s index falling to 32.1 points from 71.3 points six months ago and Hong Kong’s index falling from 83.1 points to 41.8 points.

Wang attributed the plunge in Taiwan’s consumer confidence to the “awakening” of local consumers after switching their focus from the presidential election campaign in the first half to the worsening economic conditions.
Wang doesn't want to say that what happened was not an "awakening" -- economic growth was 6% in the first half of the year -- but plunging economic growth since the KMT administration took office (I contemplate with laughter the many claims that "now the adults will be in charge" describing the KMT). But what's the solution? The China Cargo Cult:
However, Wang expressed confidence that Taiwan’s consumer confidence would improve following the resumption of cross-strait talks, which he expected would help stimulate the nation’s economic growth.
China solves all ills! I'll be curious to see what emerges in practice with these cross-strait deals, since we've all seen how successful the previous deals on flights and tourism were.

Speaking of ills and China, a friend alerted me to her wonderful blog Taiwanese Greek, by Taiwanese who live in Greece. This post on the melamine safety procedures is a great look at safety in the Potemkin Village state. The blogger was inspired by another blogger who noted:
Excerpt from Eric's writing:

...So what has been the reaction from the KMT government in Taiwan? It can be described as slow, laughable, and worst of all, deadly for Taiwanese citizens. The KMT’s Department of Health (DOH) on Wednesday night, in a move that defies all sense and reason, actually loosened the food safety standard for melamine from 0 parts per million (ppm) to 2.5 ppm, meaning that imported Chinese food products to Taiwan can contain up to 2.5 ppm of deadly melamine. Even in China, pig feed must have below 2.0 ppm of melamine...
Read the whole post, it's a fear ride.


MJ Klein said...

i hear all these reports about how our economy is bad, etc. but i just don't believe it. our orders are up, and if anything, we're exporting more than we did last year, and our factories are producing more products for the same customers than they were last year. where is this downturn that everyone is complaining about?

Unknown said...

Here are a couple of clues my wife noticed when she was last in Taiwan, a month or so ago.

Sale time at the department store, which is usually very busy. No customers. Maybe 10 people in the whole store.

Street of tea shops which last year were all open 24 hours and had brisk trade. All except one was closed at 10pm and the last one open had only two tables occupied.

Just because some factory bosses are doing okay doesn't mean everyone is, not even most. Most working Taiwanese I know haven't had a pay rise in three or four years. Food and other consumer comestibles are otoh going up in price quickly. Not surprisingly many people's disposable income is falling.

Unknown said...


1. Look at the Baltic Dry Shipping Index. This is a measurement of export activity - how much stuff are people moving around the world? It has fallen 90% in just 2 months. World trade is GONE. And this is coming up to christmas! Expect to see empty shelves and empty shops in countries around the world.

2. Taiwan makes electronics. Who are their customers? Companies like 'best buy' and 'circuit city'. Read the news...

3. Look at peer countries: Sony: Profits down 70%; Toyota; profits down 70%. TSMC itself made an announcement just last week that big trouble is showing up in their order book. There is already talk of having to bail out electronics manufacturers.

4. Government statistics lag reality. Reality has changed so fast that it's not showing up in many statistics yet, except those derived through market activity.

5. Michael T: Good article! The cargo cult does not end with China though. Lots of people are also worshipping at the altar of base interest rates, somehow believing that a small drop in the cost of money will magic away the problems of ridiculous debt. The world, including Taiwan, is overloaded with bad debt just now, and Taiwan's cure (just like the US, EU and UK) is: make more bad loans to keep things going!

6. Look at forex. Taiwan just became massively less competitive. 18 months ago I got 67 TWD to the pound. Today it's 48. In other words, Taiwanese goods just jumped in price by 40% for the UK. A similar pattern can be seen with many other countries. Do you think that kind of situation is going to make exporting easier, or more difficult, for Taiwan?

Antonio Liao said...

In my opinion, the media is overblow nowdays, news for TV and internet were like to increace populity by "hot topic".

due to reason, news are going to bullshit and they all need to. People sitting together, and all their topic is "Yes, we do" "change" "E is bad" .... Than the fear of losing money comes into action.

but ....the price of orgin supply were going down these day.

Later time, after chinese new year ...I think most of people would have enough power to aford buying.

MJ Klein said...

commodity prices are down, so i'm going to be able to give my customers a price reduction next year, as opposed to the price increase i gave them at the beginning of 2008. this will result in even more buying. as far as i can tell, things are great, and i don't make my business decisions based on how many people attend a sale at a department store, lol!

MJ Klein said...

the NT is falling against the dollar. that makes things better for exports.

TicoExpat said...


What do you make of the predictions of a contraction of
-1.8 for next year?