Superficially, Taiwan looks stable, calm, even a little boring. Its people are mostly prosperous, with gross domestic capital per capita of more than $30,000 — not as high as Singapore or Hong Kong but well ahead of South Korea and most of the rest of Asia. Growth, while no longer spectacular, is chugging along at slightly more than 3 per cent a year and inflation is under control.
The central bank has kept interest rates steady at a marvellously precise 1.875 per cent since July 2011 and Medley Global Advisors, a macro research service owned by the FT, expects it to stand pat for at least the rest of this year.
自2011年7月以来，台湾央行一直令人不可思议地将利率精确地稳定在1.875%的水平之上。英国《金融时报》旗下的宏观研究服务机构Medley Global Advisors预计，台湾央行至少在今年剩余时间将会维持现状。
Dig a little deeper, though, and Taiwan is battling to retool a mercantilist economic model that is no longer working well either for it or, indeed, for many of its regional peers. The island’s exports have dropped every month so far this year and are now expected to shrink 2.6 per cent in 2015, the first contraction since the crisis year of 2009.
While some of that can be blamed on an anaemic global recovery and weakness in mainland China specifically, the truth is that Taiwan’s largely anonymous component suppliers and middlemen are losing out to branded rivals in Korea and Japan. And the strength of the Taiwan dollar against both won and yen is certainly not helping.
Politically, too, the calm is superficial. Domestically, the former authoritarian nation has turned into a rowdy democracy, where half a million people marched in the streets last year and activists stormed parliament. Geopolitically, Taiwan is caught between the economic and cultural pull of the mainland, which has sworn to eventually reunite with it, and a growing sense of independence from China, underpinned by the US pledge to come to its military aid if necessary.
These tensions will come to a head again in the run-up to next January’s presidential elections, likely to be won by Tsai Ing-wen from the opposition Democratic Progressive party — who has been denounced as a “splittist” by Beijing. Under a President Tsai, further economic integration with the mainland would be unlikely, to put it mildly.
Which leaves investors in a tricky position. Over the medium term, there is scope to raise the country’s potential growth rate by opening up the service sector, investing in infrastructure and education and promoting other supply-side reforms. More immediately, policy makers are talking about relaxing fiscal policy next year in order to boost economic expansion.
Against that, however, the central bank will have to raise rates at some point if only to follow the US Federal Reserve. While it can use open market interventions to keep the currency reasonably stable at about 31 to the US dollar, the island’s exporters are likely to continue to lose competitiveness to the Samsungs of this world. Higher borrowing costs are also likely to constrain consumption given household debt at more than 80 per cent of GDP.
So a steady performance is probably the best that can be expected from Taiwanese assets?.?.?.?which is unexciting.