Taiwan Outpaces China as Growth Reaches Fastest Pace in More Than 30 Years
Taiwan’s economy grew at the fastest pace in more than 30 years last quarter on surging sales of computer chips and display panels to China, as it heals ideological wounds with its neighbor in favor of trade ties.
Gross domestic product rose 13.27 percent in the three months to March 31 from a year earlier, the most since 1978 and more than the median estimate in a Bloomberg News survey for an 11 percent gain, the statistics bureau said yesterday in Taipei.
Taiwan, Singapore and Japan all reported yesterday that growth accelerated in the first quarter, boosted by a rebound in global trade. In Taiwan, which outpaced China’s 11.9 percent expansion, policy makers are weighing the risk of raising interest rates from a record low against fallout from the debt crisis sparked by Greece, after April export orders from Europe fell 11 percent from the previous month.
“Taiwan benefited a lot from a rebound in the Chinese economy,” said Tony Phoo, an economist at Standard Chartered Plc in Taipei. “The economy is still prone to external uncertainty, with the Greek crisis already feeding into the export data.”
The statistics bureau yesterday raised its 2010 GDP growth projection to 6.14 percent from 4.72 percent, and its annual inflation forecast to 1.4 percent from 1.27 percent. The Central Bank of the Republic of China (Taiwan) has kept its benchmark interest rate at 1.25 percent since March last year to help extract the island from its deepest recession on record.
President Ma Ying-jeou, who abandoned his predecessor’s pro-independence stance after taking office two years ago, has pushed for a trade agreement with China to prevent Taiwan from being “marginalized” after a Chinese accord with the 10-member Association of Southeast Asian Nations took effect this year.
The proposal sparked opposition demonstrations amid concern China may boost its influence over Taiwan. The two have been ruled separately since Nationalist troops fled to the island after losing a civil war to Mao Zedong’s Communists in 1949.
Ma reiterated this week that the accord won’t harm the island’s “sovereignty.” He said a reduction in cross-strait tensions will encourage the mainland “in the long run” to remove the more than 1,000 missiles it has aimed at Taiwan.
Exports to China, Taiwan’s biggest trading partner and No. 1 overseas investment destination, soared 62 percent in April from a year earlier, after an 82 percent gain in March.
That helped Taiwan Semiconductor Manufacturing Co., the island’s biggest company by market value, forecast revenue would rise this quarter to a record NT$100 billion ($3 billion) to NT$102 billion and allow it to expand its workforce.
“We will recruit more than 3,000 engineers this year,” JH Tzeng, spokesman for Taiwan Semiconductor, said yesterday. The world’s largest custom chipmaker also plans to convert 2,400 contract positions to permanent during the year, he said.
A separate report yesterday showed export orders, an indication of shipments in the next one to three months, rose 35.15 percent in April, a seventh monthly increase.
“The return of inflation will start to concern the central bank, and the CBC will need to take preemptive measures by starting to withdraw monetary stimulus before the economy gets overheated,” Liu Li-Gang, a Hong Kong-based economist at Australia and New Zealand Banking Group Ltd., said before the GDP release. “However, the uncertainty in Europe may delay a rate hike.”
Central banks around the world are trying to gauge whether a 750-billion-euro ($925-billion) package of measures organized by the European Union and the International Monetary Fund to rescue the region’s debt-laden governments will stabilize financial markets.
In Singapore, GDP grew an annualized 38.6 percent from the previous three months in the first quarter, and Japan’s economy expanded at the fastest pace in three quarters in the period ended March 31, reports yesterday showed.
“Our cargo business nearly tripled in the first quarter from a year earlier, as we benefited from robust export growth,” Bruce Chen, spokesman for China Airlines, Taiwan’s biggest airline company, said by phone yesterday. “Our passenger business also rose after we added new destinations.”
Chinese visitors to Taiwan in the first quarter outnumbered Japanese for the first time on record as relaxed rules spurred travel to an island off limits to mainlanders for 60 years. The statistics bureau said yesterday that Chinese visitors tripled in the first quarter from a year earlier.
The planned trade accord with China has attracted overseas investors, spurring Taiwan’s dollar in April to its biggest monthly advance since September. The currency reached NT$31.269 per U.S. dollar on April 27, the strongest since August 2008.
The Taiwan dollar dropped 0.1 percent to NT$32.140 against its U.S. counterpart as of 11:48 a.m. today, according to Taipei Forex Inc. The island’s benchmark Taiex stock index fell 2.3 percent to 7,255.67, poised for its lowest close since Feb. 8.
“Investors are losing confidence,” said Robyn Hsu, who helps manage $3 billion at Capital Investment Trust Corp. in Taipei. “Taiwan’s gross domestic product growth will slow through the year despite a very stunning first-quarter figure yesterday. Falling commodity and gold prices suggest investors are retreating even from relatively safe markets.”