The Taiwan economy is considered to be dynamic and capitalist. It is ranked as the 7th largest Asian economy and 22nd in the global market in terms of its purchasing power parity (PPP). The International Monetary Fund (IMF) includes the Taiwan economy in the advanced group of economies. In fact, Taiwan is considered to be the most technologically developed computer microchip manufacturing country in the world.
However, this economy is not without its challenges. It is driven mostly by the exports of goods like electronics, petrochemicals, and machinery. As such, it is often influenced by the changes in global demands. Some factors that have a significant impact on the Taiwan economy are its diplomatically-isolated status, declining birth rate with a fast-aging population, and the competition from other Asian markets like China.
To do business in Taiwan, it is essential to have a clear idea about the economy. This article outlines key facts and figures of the Taiwan economy and provides a solution for quick access to this important Asian market.
What industries propel the Taiwan economy?
The Taiwan economy is heavily dependent on the industrial manufacturing sector. To be more specific, this particularly includes the export of machinery, electronics, and petrochemical goods. Other sectors that are recently propelling the market are telecommunication, utility services, and financial services.
Agreements with other countries
In June 2010, Taiwan signed the Economic Cooperation Framework Agreement (ECFA) with China. Following this, in July 2013, it signed a landmark free trade agreement with New Zealand. Finally, a trade pact was signed with Singapore in November 2013. All these indicated impactful changes in the way Taiwanese business was to be done with these countries.
Since then, however, the follow-up legislation on the ECFA has stalled. The government has instead given in to public demand to propose new legislation that governs the oversight of the cross-Strait agreements before any deals with China are finalized. This legislation is yet to be voted on, thus leaving the position of the ECFA quite uncertain.
However, after taking office in 2016, President Tsai has constantly promoted a culture of increased economic integration with the Southern and Southeast Asian countries through his SouthBound Policy initiative. He is also in favor of Taiwan becoming a part of the Trans-Pacific Partnership and wants to have bilateral trade agreements with the US. All these steps have greatly boosted the Taiwan economy and have increased the percentage of exports from the country. Core export demands remain semiconductors.
The challenges of the Taiwan economy
The Taiwan economy, though booming, faces a few challenges. These include the low birth rate of the country, which when coupled with an aging population can result in a shortage of labor in the coming future. However, this can also pose an opportunity for foreign investors who are looking to expand into this market as demand will increase for services for the aging population.
While closer relations with mainland China are beneficial for the overall business environment, unresolved political conflicts make the situation tough in certain respects. However, active efforts are ongoing to create and establish stable trade relationships with countries like China. At present, Japan and China are the two topmost countries importing goods from Taiwan and relationships with these nations must be maintained.
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