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What’s Wrong with Taiwan’s Economy? Impact of Globalization 33
What’s Wrong with Taiwan’s Economy?
Impact of Globalization
CHUANG, Yih-chyi
Abstract
Taiwan’s economic slowdown since 2000 can be attributed mainly to its sluggish domestic
demand with low domestic consumption and investment. It was the growth of foreign
trade, especially trade with China, that supported the growth of Taiwan’s economy.
As the world was hit a global financial crisis, Taiwan is heading for an economic disaster.
A severe drop in orders from abroad for ICT related products after the third quarter of 2008
signifies the suppression of export trade as the engine of economic growth for Taiwan. The
best thing Taiwan can do in 2009 to cope with sluggish domestic and foreign demand is to
stimulate domestic demand by enforcing expansionary fiscal and monetary policies to stop
the economy from further recession. However, the Taiwan economy needs further structural
transformation, particularly modernization of the service sector, to increase aggregate productivity
and create more opportunities. Taiwan also needs to map out a forward-looking
strategy to further develop international trade. Harmonious relations between the two sides
of the Taiwan Strait are conducive to Taiwan’s participation in Asian economic integration
as a regional resource coordinator.
Keywords: Global financial crisis, sluggish domestic demand, outward FDI, deindustrialization,
Asian economic integration.