A finance ministry official said the island did not expect further sanctions from Beijing due to the “highly dependent” economic ties.
A finance ministry official said it was unlikely that China’s economic measures against Taiwan would have a significant impact on trade between the two economies given how closely they overlap.
Electronic industries in both economies are “highly dependent on each other,” and Taiwan is China’s largest exporter of imported integrated circuits, Beatrice Tsai, the ministry’s chief statistician, told reporters in Taipei on Monday.
Tensions between Beijing and Taipei soared last week, with China firing missiles at Taiwan and imposing trade restrictions on some agricultural goods and building materials following a visit by US House Speaker Nancy Pelosi to the island.
“We expect there will be very little chance of China imposing tougher economic sanctions on Taiwanese companies because of our highly dependent economic relations,” Tsai said.
Taiwan on Monday reported stronger-than-expected trade data, with exports growing 14.2% in July from a year ago. That was faster than the most optimistic estimate in a Bloomberg survey of economists, and drove total shipments to $43.3 billion, the second-highest amount ever.
Export growth to China has been sluggish this year as Beijing struggles with the COVID-19 outbreak and lockdown. Shipments to China and Hong Kong increased just 3% year-on-year in July after contracting in June, compared to double-digit growth earlier in 2022. By contrast, shipments to the United States rose 24.8% last month.
largest export market
However, China and Hong Kong together remain Taiwan’s largest export market. Shipments totaled more than $16 billion in July, compared with nearly $7 billion in total exports to the United States.
Economists said the risk to Taiwan will depend on whether Beijing expands restrictions to the manufacturing and semiconductor sector. Agricultural exports from Taiwan to China accounted for just 0.6% of total exports last year, according to DBS Group Holdings Ltd.
Adrienne Lui, economist at Citigroup Inc. , in a research note, that the import ban announced thus far is “manageable for overall trade”. “But given the volatile geopolitical situation, there are still risks to other major export commodities to China” which does not enjoy any tariffs.
Another major concern was whether the series of military exercises surrounding Taiwan would have a significant impact on the shipping industry. But by Monday, navigation in the Taiwan Strait showed signs of returning to normal.
On Monday, Tsai said the development of the situation across the strait was difficult to predict. She noted, however, that exports were largely unaffected the last time Beijing ramped up pressure on Taiwan significantly in 1995 and 1996, even as financial markets and consumer confidence took a hit.
Barring any major disruption to shipping lanes or new trade measures from China, Tsai said Taiwan’s total exports were likely to rise between 8% and 12% in August.
Taiwan also has to contend with the slowdown in the global economy, which is likely to affect demand for its electronic products. Grace Ng, an economist at JPMorgan Chase NA, said momentum in Taiwan’s tech sector demand is likely to slow in the second half of the year as demand for technology to work from home declines.
“There are some worrying signs about general global demand conditions,” Ng wrote in a research note. “In particular, the recent loss of momentum in Taiwan’s tech exports appears to be somewhat concerning, as the level of tech exports appears to have peaked” in the first quarter.
Exports of electronic product parts were up 15.6% from a year ago, the slowest growth rate so far in 2022. On a monthly basis, semiconductor exports were down 1.8%.