Taiwan’s exports to mainland China fall 2.6 per cent in 2019 on weak electronics trade

24-Jan-2020 Intellasia | SCMP | 6:02 AM Print This Post

Taiwan’s exports to mainland China fell 2.6 per cent last year, their first slump since 2016, on the back of a weak electronics sector and the impact of China’s trade war with the United States, analysts said.

Total two-way trade in 2019 grew by just 0.8 per cent year on year to US$244.35 billion, compared with 13.2 per cent growth 12 months earlier, according to figures from information provider Wind Financial.

In 2018, Taiwan’s exports to mainland China rose 13.9 per cent year on year.

Iris Pang, a Greater China economist at ING Bank, said there were likely two main reasons for the poor performance.

“First, the trade war between China and the US has led to slower trade growth worldwide, and second, electronics was in a downward cycle in 2019,” she said.

But the outlook for the electronics sector looked brighter this year, she said.

“As the 5G coverage becomes broader, so demand for 5G smartphones and other devices will boost growth of the electronics trade, which is an important element of trade between mainland China and Taiwan.”

John Marrett, an Asia analyst with The Economist Intelligence Unit, said integrated circuits (chips) accounted for 35.4 per cent of Taiwan’s goods trade with mainland China in 2019.

“It is very difficult to tell what the [trade war] tariffs did to [Taiwan-mainland China] trade, but from what I have seen there has not been a big direct effect,” he said.

“But the background story that has been going on for a few years is that China has tried to be less reliant on Taiwanese goods in a few categories, though not electronics.”

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Marrett said another possible explanation for the disappointing performance in the electronics sector was that Taiwan had not come up with any notable new developments over the past 12 months, a factor reflected in its global trade.

That said, the outlook for trade between Taiwan and the mainland looked better this year as manufacturers on the self-ruled island were working on new developments, he said.

“They are producing a new generation of very small integrated circuits, essentially microchips,” Marrett said, adding that Taiwan had a monopoly in such products.

Alicia Garcia Herrero, chief economist for the Asia-Pacific at the French bank NATIXIS, said Taiwan had been trying to reduce its dependence on trade with China’s mainland.

The mainland is Taiwan’s largest trading partner ahead of the US accounting for 23.9 per cent of the island’s total trade and providing 18.6 per cent of its total imports in 2018.

“Partially, [it's] the result of Taiwan’s own strategy to diversify away from [mainland] China,” she said.

“Such a strategy has proven quite successful with a surge of Taiwanese exports to the US and more trade with Southeast Asia.”



Category: Taiwan

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