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Talk of the Day -- Taiwan's trade dependence on China falling

2012/07/11 22:17:53

Exports to China and Hong Kong accounted for 38.1 percent of Taiwan's overall outbound shipments in the first half of this year, the lowest since 2005, according to statistics released by the Ministry of Finance (MOF) earlier this week.

The ratio, which indicates a country's trade dependence on a market, may hit an eight-year low for 2012 as a whole as Taiwan's export prospects for the second half of the year remain bleak, trade officials forecast.

The officials attributed the decline in trade dependence in part to China's industrial restructuring efforts in recent years in which it hopes to replace old economy businesses with industries of the future.

Such a drive, popularly called "vacating the cage for new birds," has dealt a blow to export-oriented Taiwanese companies in China's coastal regions, consequently hurting Taiwan's exports to the mainland, the officials said.

Worse still, the officials said slackening global demand is also testing the sustainability of the business model of China-based companies importing raw materials or semi-finished products for processing and then exporting finished goods to Europe, the United States and Japan.

According to China's latest customs data, two-way trade across the Taiwan Strait posted a 5.2 percent decrease in the first half of this year as compared with the year-earlier level.

The following are excerpts from local media coverage of slump in cross-strait trade:

Economic Daily News:

Taiwan's exports to China and Hong Kong exceeded 40 percent of its total outbound shipments in 2007 for the first time, reaching 40.7 percent, according to official statistics.

With the exception of 2008 when the ratio shrank to 39 percent amid a global financial crunch, the share of sales to the Chinese and Hong Kong consistently surpassed 40 percent of Taiwan's annual outbound shipments in all other years.

According to MOF tallies, Taiwan saw a 4.7 percent year-on-year decline in exports in the first half of this year, the worst trade performance among major neighboring Asian countries.

One of the reasons behind the drop could be attributed to a decrease in shipments to China and Hong Kong, which form Taiwan's largest export outlet and top source of trade surplus.

Economics Ministry officials said Taiwan's trade dependence on China began to show signs of decline last year. The trend exacerbated this year as the eurozone debt woes have slackened China's economic growth.

Most worrisome was that China's "vacating the cage for new birds" policy has led to an industrial structural transformation and has consequently resulted in significant changes in Taiwan's exports to China, the officials said.

For years, Taiwan's investment in China has helped fuel or bolster its export growth in that market. As China-based Taiwanese companies tend to be export-oriented, their development in China has been restricted under China's industrial restructuring policy aimed at stimulating domestic demand, phasing out certain old economy businesses and nurturing industries of the future, the officials said.

"With many China-based, export-oriented Taiwan companies forced to end their operations under China's new policy and changing economic climate there, our shipments to the mainland have slumped as a result," said a trade official.

Data compiled by the Investment Commission show that accumulated Taiwanese investment in China amounted to US$4.24billion in the first five months of this year, down 21.5 percent from the year-earlier level.

"The plunge indicated that China's lackluster export growth amid the current global economic slowdown has dampened local companies' interest in launching new investment projects on the mainland," the official added. (July 11, 2012).

Commercial Times:

Zheng Yuesheng, spokesman for China's General Administration of Customs, said Tuesday that cross-strait trade is going through a low ebb or a relatively difficult period.

Two-way cross-strait trade amounted to US$75.02 billion in the January-June period of this year, down 5.2 percent year-on-year, Zheng said, adding that the amount accounted for 4.2 percent of China's total foreign trade for the six-month period.

Of the amount, China sold US$16.5 billion worth of goods to Taiwan, down 5.8 percent, while importing US$58.52 billion worth products from Taiwan, down 5 percent.

Although China's overall imports from fell during the period, its imports of Taiwanese items on the "early harvest" list under the Cross-Strait Economic Cooperation Framework Agreement increased by 104 percent year-on-year, Zheng said. (July 11, 2012)

(By Sofia Wu)
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