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Taiwan Growth Underlines Long Term Shift

Business, China, Company Strategy, Environment, Indonesia, Malaysia, Singapore, Taiwan
By John Richardson on 03-May-2013

TaiwanGrowthComposition.pngBy John Richardson

EVIDENCE that China is no longer acting as the growth engine of the world, because it is too busy dealing with internal adjustments, is mounting.

For example, on Tuesday of this week Taiwan announced that its year-on-year Q1 2013 GDP growth had fallen to just 1.5%. This was less than half of the 3.7% growth recorded in the previous quarter and well below forecasts of 3.1%.

As this Beyondbrics blog post points out: “By global standards, Taiwan is a smallish economy. But with its trade links to the rest of the world, it serves as a useful harbinger. And this is not good news.

“Taiwan’s economy is heavily reliant on trade, particularly of electronic goods, leading many economists to worry about the impact of recent disappointing growth in China, where economic growth slowed to 7.7% [again in the first quarter].

“Taiwan’s first quarter stumble follows weaker-than-expected production and export figures that show demand for Asia’s exported goods is unsteady. Taiwan’s export orders, which include orders for goods to be exported from Taiwanese-owned factories in mainland China, fell 6.6% in March.”

The chart above illustrates how Taiwan’s export-vulnerable economy serves as a very good indicator of changes in global economic growth patterns.

Yesterday, we discussed Southeast Asia. Despite the economic boom in that region, some of its heavily trade-exposed economies, such as Singapore’s, are likely suffering from the slowdown in China.

What worries the blog is that many chemicals companies may have assumed much-higher growth rates this year for demand, based on misplaced confidence in China’s willingness to sustain its Q4 2012 rebound in growth.

The 2013 Asia Petrochemical Industry Conference (APIC) takes place in Taipei on 9-10 May next week. We will be there and will be keen to observe if a more realistic view of the world now prevails.

Realism isn’t the same as pessimism. In the long term, the opportunities in China remain enormous for chemicals companies with the right strategies.