Taiwan needs diverse trade amid US-China row: Finance chief

Taiwan’s trade has been pressured this year by waning demand from China and around the world, which has weighed on the export-dependent economy. PHOTO: AFP

TAIPEI – Taiwan needs to diversify its trade away from China, the island’s Finance Minister said, citing uncertainties created by Beijing’s zero-Covid-19 policy and rising geopolitical tensions between Washington and Beijing.

The recent US technology curbs imposed on China have “increased the uncertainty of the market”, Finance Minister Su Jain-rong said in an interview on Friday, after the Asia-Pacific Economic Cooperation finance ministers’ meeting in Bangkok.

He added that one of Taiwan’s goals is to “try to diversify our trade partners, our trade market, so that we are not going to put all our eggs in one basket”.

Taiwan’s trade has been pressured this year by waning demand from China and around the world, which has weighed on the export-dependent economy.

Overseas shipments contracted in September for the first time since 2020, while export orders declined for the third time this year. 

Officials have largely attributed the drop-off to China as Covid-19 restrictions and a property slump are depressing consumer and business confidence there.

Escalating US-China tensions have further clouded Taiwan’s outlook and rattled the global semiconductor industry.

After the US announced tighter controls over chip exports to China this month, shares in Taiwan Semiconductor Manufacturing Co fell the most in 28 years.

The Taiwanese firm makes chips for major companies that rely on the Chinese market for much of their business, while also taking in about 10 per cent of its own revenue from China-based customers.

Mr Su said he had not talked formally during the week with US Deputy Treasury Secretary Wally Adeyemo, but said he thinks both sides are looking at the US-China relationship.

“The United States is concerned about the supply chains of advanced chips,” he added.

Taiwan’s exports to China and Hong Kong, he said, have declined over the past couple of years due to Covid-19 restrictions and US-China disputes, slipping below 40 per cent of the island’s total exports.

Mr Su said Taiwanese businesses have already started relocating factories from China to South-east Asia – not so much in the semiconductor industry, but in machinery and other labour-intensive sectors. Vietnam and Thailand are targets, he added.

Taiwan has been looking to diminish its dependence on China in recent years, and has explored ways to bolster trade and investment with South-east Asia, India, Australia and New Zealand. Taipei last year asked to join one of the Asia-Pacific’s biggest working trade deals, though its application is still pending.

The Finance Minister also said Taiwan is looking “very carefully” at how to manage financial stability, as the local dollar has weakened in 2022 and as the benchmark Taiex index has declined, tumbling nearly 30 per cent in 2022 and ranking among the world’s worst-performing gauges.

Global funds have pulled a net US$47 billion (S$66.8 billion) from local equities in 2022, putting Taiwan on track for its biggest annual outflow in more than two decades.

Taiwan’s financial regulator ratcheted up rules on short selling on Friday as a way to stabilise its equities market amid a continued global rout. The tightening is the third such measure since the end of September.

The Taiex was up 1.3 per cent as at 9.16am on Monday morning after gaining as much as 1.6 per cent earlier, the first gain in four days, after the regulatory curbs were announced.

The US Federal Reserve’s interest rate hikes cause “a lot of problems for financial markets around the world, not just Taiwan”, Mr Su said.

Another issue is the increasing costs of imports, he said, noting that since Taiwan brings in a lot of its raw materials from abroad, imported inflation is another risk.

Should the Fed continue raising rates, the “Taiwanese dollar and financial stability may be affected significantly”, Mr Su said.

“It’s not easy to handle it, but we have to face it.” BLOOMBERG

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