Taiwan’s Growth Carries it to Front of the Pack for Asian Economic Expansion

For the fourth straight quarter, Taiwan has leapt ahead of other Asian economies in terms of expansion. Expected first-quarter report results should demonstrate growth of about 3.5 percent, according to a report by Bloomberg News. That would put it at least one full percentage point ahead of South Korea, Singapore, and Hong Kong. As such, Taiwan may become the model by which other economies, particularly around Asia, measure their own success.

For the fourth straight quarter, Taiwan has leapt ahead of other Asian economies in terms of expansion. Expected first-quarter report results should demonstrate growth of about 3.5 percent, according to a report by Bloomberg News. That would put it at least one full percentage point ahead of South Korea, Singapore, and Hong Kong. As such, Taiwan may become the model by which other economies, particularly around Asia, measure their own success.

The trick to Taiwan’s success has been a shift from an export-oriented economy to one that is more domestic demand-driven. Of course, a big part of this success ties directly to the influence of American tech giant Apple Inc. Apple uses Taiwan’s two biggest technology manufacturers to supply parts for its wildly popular iPhone. As a result, some economists have noted a direct correlation between the product life cycle of Apple products and Taiwan’s economic performance. Although the components manufactured by Taiwanese factories may flow into the supply chain of a foreign tech giant, many of the devices powered by those parts have found their way back to Taiwan. Factory workers spend their rapidly growing incomes on more luxury items, including Apple devices, increasing demand, and fueling further growth.

Indeed, one of Apple’s primary Taiwanese chip suppliers, Taiwan Semiconductor Manufacturing Co., (TSMC) has taken advantage of the boom in consumer electronics to become one of the world’s biggest contract chipmakers. In an announcement earlier this month, TSMC set forth plans to spend $11 billion improving and expanding its facilities and adding approximately 5,000 new jobs

Nevertheless, Taiwan’s economy does face challenges, just like any other. As the US economy faltered, so did Taiwan’s thanks to its close relationship with Apple and other technology buyers. Similarly, the drop in oil prices and the increased value of the nation’s currency have caused Taiwanese exports to look less competitive as compared to offerings from rival electronics producing nations like Japan and South Korea.

Nevertheless, Taiwan’s steady economic expansion has wooed more than a few foreign investors. Taiwan has the fifth largest foreign reserves in the world, and a consistent current-account surplus. With such a successful record of accomplishment and rosy outlook, many investment firms around the world have taken to recommending Taiwanese investments quite regularly to their clients. As Katrina Ell, an economist at Moody’s Analytics in Sydney recently said, “We’re quite upbeat about Taiwan this year.”