Taiwan: Market Profile
12 September 2017
Major Economic Indicators
|Economic Indicators||2015||2016||Jan-July 2017|
|Area (km2)||36,197 (end-Dec)||36,197 (end-Dec)||36,197 (end-July)|
|Population (million)||23.49 (end-Dec)||23.54 (end-Dec)||23.55 (end-July)|
|GDP (US$ billion)||525.2r (+0.72%)*r||529.9r (+1.48%)*r||275.6p (+2.39%)*1|
|GDP per capita (US$)||22,384r||22,540r||24,120f|
|Inflation (CPI)||0.14% (end-Dec)||1.69% (end-Dec)||0.77% (end-July)|
|Unemployment Rate||3.78% (annual average)||3.92% (annual average)||3.76% (Jan-Jul average)|
|Exports (US$ billion)||285.3 (-10.9%)||280.3 (-1.8%)||174.8 (+12.5%)|
|Imports (US$ billion)||237.2 (-15.8%)||230.6 (-2.8%)||146.6 (+14.9%)|
|Trade Surplus (US$ billion)||48.1||49.7||28.2|
|Inward Direct Investment (US$ billion)||4.8 (-16.9%)||11.0 (+130.1%)||4.4 (-27.4%)|
|Approved Indirect Investment in Mainland (US$ billion)||11.0 (+6.7%)||9.2 (-11.7%)||5.2 (-12.2%)|
|Exchange Rate (NT$ per US$)||33.066 (end-Dec)||32.279 (end-Dec)||30.435 (end-July)|
|Foreign Currency Reserves (US$ billion)||426.0 (end-Dec)||434.2 (end-Dec)||444.5 (end-July)|
figures in ( ) = year-on-year change
* = in real terms
f = forecast
r = revised figures
p = preliminary figures
1 = Jan-June 2017 figures
Source: www.stat.gov.tw; www.moea.gov.tw; www.cbc.gov.tw; www.dgbas.gov.tw
- With the global economy recovering at a steady pace, the value of Taiwan’s exports has been consistently growing. In dollar terms, Taiwan’s exports were 5.0% higher in July than the previous month, the tenth consecutive month this figure has risen. Meanwhile, imports in July climbed 8.7% from the month before. In the period between January and July 2017, Taiwan’s exports increased 12.5% and its imports rose 14.9%. According to the latest forecast made by the Directorate General of Budget, Accounting and Statistics (DGBAS) of Taiwan's Executive Yuan, Taiwan’s economy will grow by 2.11% in 2017.
- Taiwan and the Chinese mainland entered into the Economic Co-operation Framework Agreement (ECFA) on 29 June 2010. According to the Early Harvest List of ECFA, both parties have eliminated the import tariffs on relevant products since 1 January 2013. Also, the mainland has opened up 11 sectors to Taiwanese service providers, and Taiwan has reciprocated by opening nine sectors, covering both financial and non-financial services, to mainland service providers.
- Taiwan and the Chinese mainland signed the Cross-Straits Agreement on Trade in Services on 21 June 2013, under which the mainland pledged to further open up 80 categories of services to Taiwanese service providers, in the areas of e-commerce, securities brokerage, banking, insurance, culture and creativity, transportation, and technical certification and analysis. In return, Taiwan committed to further open up 64 service sectors, including securities brokerage, banking, insurance, tourism, medical services, and technical certification and analysis, to mainland service providers. The two parties are going through the ratification procedures of the agreement respectively.
Current Economic Situation
In tandem with the steady recovery of the global economy, Taiwan’s economic growth has begun to pick up. Driven by the demand for electronic goods, rising demand for machinery in overseas markets, and the rebound in crude oil and basic metal prices on the international arena, Taiwan’s goods exports for January-July 2017 in dollar terms rose 12.5% year-on-year, with exports of electronic goods, communication and audio-visual products, and basic metal products registering significant growth.
The lead in advanced processes enjoyed by Taiwan's semiconductor manufacturers and the replenishment of stocks by global electronic giants is expected to help boost the export of electronic goods in the second half of 2017. The rise of the Internet-of-Things and the growing demand for automobile electronics and other new smart applications also is likely to lead to a rise in capital expenditure on the part of semiconductor manufacturers.
Local consumption remains weak as people are generally pessimistic about Taiwan’s economic prospects for the coming six months. As a result, the consumer confidence index (CCI) continues to drop, from 92.93 in April 2015 to 78.19 in July 2017. The range of CCI values spreads from 0 to 200, with values ranging between 100 and 200 rated as “optimistic” and between 0 and 100 “pessimistic”.
While Taiwan’s unemployment rate still hovers at a low level (3.84% in July), youth unemployment remains a serious problem. This, coupled with slow wage growth, is likely to restrict the scope for spending growth. The forecast made by DGBAS in July 2017 is that Taiwan's economic growth for the whole year will be 2.11%.
Taiwan’s exports increased year-on-year by 12.5% to US$174.8 billion during January-July 2017. Major export categories include electronic goods (which account for 32.5% of total export value), communication and audio-visual products (27.9%), basic metal products (9.4%), machinery (8.0%), plastic/rubber products (7.4%) and chemicals (6.2%). Leading export markets include the Chinese mainland (27.0% of total export value), Hong Kong (12.7%), the US (11.8%), Japan (6.7%) and Singapore (5.7%).
Taiwan’s imports rose year-on-year by 14.9% to US$146.6 billion during the same period. Major import categories are electronic goods (18.6% of total import value), minerals (17.6%), chemicals (10.8%), machinery (11.0%) and basic metal products (8.0%), coming mostly from the Chinese mainland (18.7% of total import value), Japan (16.4%), the US (11.7%) and South Korea (6.3%).
During the period January-July 2017, US$4.4 billion of foreign direct investment (FDI) from locations other than the Chinese mainland was approved by the Investment Commission of the Ministry of Economic Affairs of Taiwan, down 27.4% from the comparable period a year before. The biggest source of FDI was the Netherlands, accounting for 40.0% of the total, followed by the British Overseas Territories in the Caribbean (23.3%), Japan (7.6%), Canada (5.7%), Samoa (4.3), Hong Kong (3.6%) and the US (3.2%). The electronic parts and components manufacturing sector attracted the largest amount of FDI, 43.1% of the total. Other major sectors include wholesaling and retailing (10.4%), finance and insurance (9.3%) and professional, scientific and technical services (7.0%).
Economic and Trade Relations with Chinese Mainland
Under Taiwan’s Regulations Governing Permission of Trade between Taiwan Area and Mainland Area (《台灣地區與大陸地區貿易許可辦法》), trade with the Chinese mainland is allowed (with exceptions). In accordance with the Cross-Strait Agreement on Air Transports (《海峽兩岸空運協議》) and the Cross-Strait Agreement on Ocean Transports (《海峽兩岸海運協議》) reached in November 2008, direct air/ocean transports between designated Taiwan and mainland seaports/airports are also allowed.
As regards investment, under Taiwan’s Regulations Governing the Approval of Investment or Technical Co-operation in Mainland China (《在大陸地區從事投資或技術合作許可辦法》), business investment and technical co-operation undertaken in the mainland by Taiwanese companies is subject to the approval of Taiwan’s Investment Commission. But Taiwan has been gradually relaxing its restrictions on mainland investment, including such hi-tech projects as the production of semiconductors and wafer fabrication, as well as investment under US$200,000. Since the beginning of 2010, it has also lifted technical restrictions on investing in the production of TFT-LCD panels on the mainland and allowed mergers and acquisitions or equity investment of TFT-LCD panel factories.
According to figures from the Investment Commission, approved investments on the mainland during January-July 2017 dropped 12.2% from the year before to US$5.2 billion. As at the end of July 2017, a total of 42,349 mainland investment projects had been approved, amounting to a cumulative sum of US$170.3 billion. The main areas of investment are the production of electronic parts and components, computers, electronic and optical products, and finance and insurance. Jiangsu, Guangdong and Shanghai are the regions which receive the majority of Taiwanese investment.
Taiwan’s Approved Indirect Investment on the Chinese Mainland, by Major Industry
|Cumulative investment as at July 2017|
|No. of projects||Approved investment amount (US$ billion)||Share of investment amount|
|All industries, of which:||42,349||170.2||100.0%|
|Manufacturing of electronic parts and components||
|Manufacturing of computers, electronic and optical products||2,855||23.6||13.8%|
|Finance and insurance||366||12.5||7.3%|
|Wholesaling and retailing||3,185||11.2||6.6%|
|Manufacturing of power equipment||3,176||10.9||6.4%|
Taiwan’s Approved Indirect Investment on the Chinese Mainland, by Major Region
|Cumulative investment as at July 2017|
|No. of projects||Approved investment amount (US$ billion)||Share of investment amount|
|All regions, of which:||42,349||170.2||100.0%|
Cross-Strait Economic Co-operation Framework Agreement (ECFA)
Taiwan and the Chinese mainland entered into the Economic Co-operation Framework Agreement (《海峽兩岸經濟合作架構協議》, ECFA) on 29 June 2010, with it coming into effect on 12 September 2010.
The ECFA included an Early Harvest List for trade in goods across the Strait. The mainland promised to reduce/exempt import tariffs on 539 Taiwan-origin products (according to 2009 tariff codes), including petrochemicals, machinery, textiles, transportation vehicles and parts, and agricultural produce. Reciprocally, Taiwan undertook to reduce/exempt import tariffs on 267 mainland products (according to 2009 tariff codes), including petrochemicals, machinery, textiles, transportation vehicles and parts. The related import tariffs have been lowered since 1 January 2011, and were eliminated completely by 1 January 2013.
As to the Early Harvest List for trade in services, the mainland promised to open up 11 service sectors to Taiwanese service providers – accounting, auditing and bookkeeping, computer services, R&D services in natural sciences and engineering, conference services, professional design services, films, hospitals, aircraft maintenance, insurance, banking services, and securities and futures. Taiwan promised to open up nine service sectors to mainland service providers – R&D services, conference services, exhibition services, special product design services (except interior design), films, brokerage services, sport and leisure services, computer reservation system services for air transport, and banking services. Both the mainland and Taiwan have already opened up the above sectors to the other party in two stages, in November 2010 and January 2011.
The Cross-Strait Investment Protection and Promotion Agreement and Cross-Strait Customs Co-operation Agreement, signed between Taiwan and the mainland on 9 August 2012, both came into effect on 1 February 2013. The former provides investors on both sides of the Strait with systemised protection of their investment interests, including property rights, management rights and personal safety. The latter will be instrumental in simplifying customs clearance procedures, thereby lowering operating costs for cross-Strait businesses and deterring smuggling activities across the Strait. In addition, the governments on both sides of the Strait have published a statement of mutual understanding on personal freedom and safety issues under the investment protection agreement. Both sides will further improve the protection of personal freedom and safety of cross-Strait investors and related personnel through enhancing the contact and communication mechanisms in accordance with the respective rules of each side.
Taiwan and the Chinese mainland signed the Memorandum of Understanding (MoU) on Cross Strait Currency Clearing Co-operation (海峽兩岸貨幣清算合作備忘錄) on 31 August 2012 and have implemented the cross-strait currency clearing mechanism. The Taipei branch of the Bank of China has been authorised to offer renminbi clearing services in the Taiwan region. Since February 2013, designated forex banks (i.e. domestic banking units, or DBUs) and overseas financial institutions have, after signing currency clearing agreements with the Bank of China's Taipei branch and completing the account opening procedures, been able to launch renminbi business in Taiwan. On the other hand, the Chinese mainland has allowed the Shanghai branch of the Taiwan Bank to conduct New Taiwan dollar cash buying and selling business.
Taiwan and the Chinese mainland signed the Cross-Straits Agreement on Trade in Services on 21 June 2013, under which the Chinese mainland pledged to further open up 80 categories of services to Taiwanese service providers, covering e-commerce, securities brokerage, banking, insurance, culture and creativity, transportation, and technical certification and analysis. In return, Taiwan committed to further open up 64 service sectors, including securities brokerage, banking, insurance, tourism, medical services, and technical certification and analysis, to mainland service providers. The two parties are going through the relevant procedures respectively. The agreement will enter into force on the day after the date on which the two parties receive a notification on the completion of the relevant procedures from the other party.
Taiwan and the Chinese mainland also signed the Cross-Straits Agreement on Avoidance of Double Taxation and Enhancement of Tax Co-operation in August 2015, which provides Taiwan and mainland enterprises with preferential tax reduction or exemption measures and a mechanism for dispute resolution in order to resolve the problem of double taxation for people and enterprises on both sides. The tax exemptions cover such areas as business profits, sea and air transportation and investment. The two sides are in the process of ratifying the relevant procedures of the agreement.
Economic and Trade Relations with Hong Kong
Hong Kong’s total exports to Taiwan in January-July 2017 increased 33.1% year-on-year to US$6.54 billion. Major export items included semiconductors and integrated circuits (accounting for 29.1% of the total), deep-frozen food (20.3%) and telecommunications equipment and parts (7.9%).
Hong Kong’s imports from Taiwan in the same period rose 11.7% year-on-year to US$22.45 billion. Major import items included semiconductors and integrated circuits (71.4% of the total), telecommunications equipment and parts (4.8%) and office machine and computer parts/accessories (3.0%).
|Value||Change (%)||Ranking||Value||Change (%)||Ranking|
|Total exports||9.55 ||+14.6 ||7 ||6.54 ||+33.1 ||5|
|Domestic exports||0.24||-11.8 ||4||0.14||-1.3||6|
|Re-exports||9.32||+15.5 ||7||6.40 ||+34.1||5|
|of which re-exported||39.32||+11.2||2||23.35 ||+15.0||2|
|Trade balance||-27.89||— ||— ||-15.91 ||—||— |
Remarks: Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.
Source: Hong Kong Census & Statistics Department
According to Taiwan’s Investment Commission, Taiwan approved 395 investment projects from Hong Kong companies during January-July 2017, amounting to US$160 million in total value, a fall of 51.3% from the year before. In the same period, approval was given for 28 investment projects in Hong Kong from Taiwanese companies, with a total value of US$93.99 million (down 44.6% year-on-year).
A considerable number of Taiwanese companies have set up a presence in Hong Kong. According to the latest figures from the Census and Statistics Department of Hong Kong, as at June 2016, 25 Taiwan companies had set up their regional headquarters in Hong Kong, while 115 had regional offices here and another 247 had established local offices to manage their business in the territory.