Taiwan’s economy outgrows China’s for the first time in 30 years as
Taiwan unexpectedly took the lead in Asia last year and overtook China for the first time in 30 years.
Taiwan’s economy grew 2.98% in 2020 compared to last year, according to preliminary estimates by the island’s statistical office..
It beat the central bank‘s forecast of 2.58% and outstripped Vietnam’s growth by 2.9%. Some economists predicted that Vietnam will become Asia’s fastest growing economy in 2020.
Taiwan’s growth last year was also higher than China’s year-over-year growth of 2.3% in 2020. The island last outgrew its giant neighbor in 1990, when it grew 5.5% more than China’s 3.9%, official figures from both sides showed..
«2020 was a record year for Taiwan and we expect the star will continue to shine», – the economist of the British bank Barclays wrote in a Friday report Angela Hsi (Angela Hsieh).
Strong exports of Taiwan-made products in the second half of last year, especially semiconductors, helped the economy, Hsi said. «easy to compensate» any costs associated with a pandemic. Economist raised her forecast for Taiwan’s 2021 growth by 1.2 percentage points to 5.2%, well above the official forecast of 3.83%.
Taiwan has also achieved relative success in containing the spread of Covid-19, allowing its economy to escape the lockdown that other countries around the world face. The island has 911 confirmed cases and eight deaths as of Sunday, according to the Taiwan Center for Disease Control..
Taiwan is the largest center for the production of semiconductors, which are among the most important components for creating products from cars to computers and mobile phones..
Global demand for chips skyrocketed when the pandemic forced people to spend more time indoors as restrictions sparked a surge in sales of consumer electronics such as laptops..
More recently, a global semiconductor shortage has forced several automakers, including the American carmaker Ford Motor and Japan’s Nissan Motor, to cut production at some of their factories..
Economists at research firm TS Lombard estimate that Taiwan and South Korea account for 83% of world processor chip production and 70% of memory chip production, which means that the two East Asian countries have almost monopoly status in both industry segments..
This dominance will allow Taiwan and South Korea «use your increased strategic importance for economic and political benefits» from the US and China – their two largest clients, economists said in a Friday note.
«Taiwan and Korea are at the forefront of the US-China confrontation, relying on the rise of China, but also on the US as the guarantor of national security», – they said.
For Taiwan, such «victories» included arms sales from the US and a lack of economic pressure from China, economists at TS Lombard say.
The Chinese Communist Party (CCP) in Beijing declares that the democratic and self-governing island of Taiwan – it is a runaway province that must be reunited with the mainland. The CCP never ruled Taiwan.
In the near term, China may become more dependent on Taiwan for semiconductor manufacturing, according to TS Lombard, as it divested of US suppliers. Beijing seeks to become self-sufficient in the long term as tensions with the US escalate, but some analysts say China’s options in this regard are still far behind..
«The exclusion of US suppliers further increases the PRC’s dependence on Taiwan and Korea», – written by economists TS Lombard.
«The mainland’s dependence on Taiwan is so great that Beijing is unwilling to exert economic pressure on the island, instead, China has adopted the tactics of waging war in «gray area» and even talks about hostilities, while continuing to buy TSMC products», – they added, referring to the world’s largest semiconductor manufacturing facility in Taiwan.
TSMC shares in Taiwan jumped 60% last year as the coronavirus spread globally. Shares have continued to rally this year, up 11.5% in January from last year’s close..
«It is a matter of time before mainland Chinese companies catch up with Taiwanese capabilities in the production of high-tech electronic components such as semiconductors.», – said Iris Pang (Iris Pang), Chief Economist for Greater China at Dutch bank ING.
«In a few years, when mainland China begins to achieve self-sufficiency through advanced technology, it will not only not buy as much from Taiwan as it used to, but will also become Taiwan’s main competitor in the global market.», – she wrote in a policy brief last week.
Pang added that before that happens, Taiwan’s growth is due to «the only engine of growth» electronics exports are likely to continue in 2021. She explained that demand could come from automakers as well as consumers upgrading their smartphones and computer equipment..
«All of this speaks to the good market prospects for Taiwanese semiconductor manufacturers this year.», – said the economist.
«So even if Taiwan may be overly dependent on the electronics sector for economic growth, employment opportunities and investment, this is less of a problem given that other countries cannot compete in power and technology.».