The Central Bank of the Republic of China (Taiwan) estimates that Taiwan’s economic growth rate will continue to rise next year, while mainland China is experiencing weak domestic demand, leading to imbalances in the supply and demand of goods and an increased risk of deflation. The oversupply of goods has resulted in low-priced exports, triggering trade partners to raise trade barriers, which is detrimental to global trade development.
The Central Bank of the Republic of China (Taiwan) has stated that benefiting from the growth momentum of private investment in the second quarter of this year, the economic growth rate reached 5.83%. This exceeded the original expectations. The Central Bank forecasts that the economic growth rate in the second half of the year will be 1.99%, roughly in line with the June forecast. The annual economic growth rate has been slightly raised from the June forecast of 3.77% to 3.82%, with an estimated economic growth rate of 3.08% for next year.
The Taiwan Central Bank points out that major domestic and foreign institutions predict robust growth for Taiwan’s economy next year, with an average growth rate forecast of 2.82%. However, there are still many uncertainties affecting Taiwan’s economic performance, including divergent steps in major central banks’ monetary policy adjustments, the disjointed global economy and supply chain restructuring, the spillover effects of China’s slowing economic growth, geopolitical risks, and structural factors impacting the global economy and inflation. These uncertainties may affect Taiwan’s economic performance in the second half of this year and next year.
Regarding the divergent path of major central banks’ monetary policy adjustments, the Taiwan Central Bank stated that the current monetary policies of European and American countries diverging from Japan may impact international capital flows, exacerbating volatility in global stock and currency markets, which is unfavorable for global economic growth.
On the fragmentation of the global economy and supply chain restructuring, the Taiwan Central Bank explained that trade tensions between the U.S. and China persist; the EU has imposed balances tariffs on Chinese electric cars, and the Artificial Intelligence Act that came into effect in August could intensify trade frictions between China and Europe. Conflicts in U.S.-China and China-EU trade could accelerate global supply chain restructuring and lead to market differentiation on a global scale. Furthermore, due to the restructuring of global supply chains and economic fragmentation, Taiwanese companies may diversify investment and trade regions, potentially reducing investment and production activities in Taiwan, thus affecting future exports and the momentum of private investment.
As for the spillover effects of China’s slowing economic growth, the Taiwan Central Bank pointed out that China’s domestic demand is insufficient, which may indirectly affect Taiwan, other Asian economies, and other economic entities through supply chains. On the other hand, by exporting surplus products to other countries, China alleviates the pressure of insufficient domestic demand, intensifying competition in related products and potentially negatively impacting global trade or Taiwan’s exports.
Concerning the impact of geopolitical risks and structural factors on the global economy and inflation, the Taiwan Central Bank stated that the U.S. presidential election will have a crucial influence on global political and economic developments. Major changes are possible in global trade and foreign military aid, affecting the international political and economic situation, escalating market turbulence and global trade uncertainty. Additionally, ongoing conflicts in the Middle East and the continuous Red Sea crisis may cause disruptions in energy and commodity markets and global supply chains, increasing the risk of global inflation.
The Taiwan Central Bank indicated that following the property crisis in China in recent years, domestic consumption has been weak, yet companies continue to expand production capacities, leading to imbalances in supply and demand, reducing business profits and labor wages, and posing an increasing risk of a deflationary spiral for the economy. The Taiwan Central Bank analysis indicates that China is a major exporter of manufactured goods globally, and the deflation risk has spill-over effects. In the first half of this year, China’s export values mostly showed positive annual growth rates, mainly due to a significant increase in export quantities. However, the unit prices of exports have declined, highlighting a clear strategy of low-priced sales for thin margins.
The Taiwan Central Bank stated that the decline in China’s export prices will indirectly lower import prices for other trading partners through intermediate goods and final products, indirectly prompting other trade competitors to follow suit with low-price strategies, impacting the manufacturing industries of importing countries and further affecting their employment situations. Additionally, the strategy of expanding low-priced exports under unfair competitive conditions by China through substantial industry subsidies has already sparked numerous trade disputes.
The Taiwan Central Bank cited examples such as the EU imposing temporary tariffs ranging from 37.6% to 17.4% on electric cars imported from China this year, and the U.S. and Canada imposing tariffs of up to 100% on electric cars imported from China. Moreover, the U.S., Canada, and Mexico have also imposed tariffs on steel and aluminum products imported from China. The increasing trade protection measures may exacerbate global trade protectionism.