Taiwan official downplays impact of China’s trade restrictions | International exchange

A finance ministry official said the island did not expect further sanctions from Beijing due to “highly dependent” economic ties.

China’s economic measures against Taiwan are unlikely to have a major impact on trade between the two economies given their close intertwining, a finance ministry official said.

The two economies’ electronics industries are “highly dependent on each other”, and Taiwan is the biggest source of ICs imported from China, Beatrice Tsai, the ministry’s chief statistician, told reporters in Taipei on Monday. .

Beijing-Taipei tensions escalated last week, with China firing missiles into Taiwan and imposing trade restrictions on some agricultural products and building materials following a visit by US House Speaker Nancy Pelosi, on the island.

“We expect very little chance of China imposing tougher economic sanctions on Taiwanese companies because of our highly dependent economic relationship,” Tsai said.

Taiwan released stronger-than-expected trade data on Monday, with export growth up 14.2% in July from a year ago. That was faster than the most optimistic estimate from a Bloomberg survey of economists, and drove total shipments to $43.3 billion, the second-highest amount on record.

Export growth to China has been slow this year as Beijing grapples with Covid outbreaks and lockdowns. Shipments to China and Hong Kong rose just 3% year-on-year in July after contracting in June, compared to double-digit growth earlier in 2022. In contrast, shipments to the United States States jumped 24.8% last month.

largest export market

Even so, China and Hong Kong combined remain by far Taiwan’s largest export market. Shipments totaled more than $16 billion in July, compared to nearly $7 billion in total exports to the United States.

Economists said the risk to Taiwan would hinge on whether Beijing expands restrictions to cover manufacturing and semiconductors. Taiwan’s agricultural exports to China accounted for just 0.6 percent of total exports last year, according to DBS Group Holdings Ltd.

The import bans announced so far “are manageable for all trade,” wrote Adrienne Lui, an economist at Citigroup Inc., in a research note. “But given the fluid geopolitical situation, there are still risks for other key export products to China” which do not benefit from any tariffs.

Another major concern was whether a series of military exercises around Taiwan would have a significant impact on the shipping industry. On Monday, however, shipping in the Taiwan Strait showed signs of returning to normal.

Tsai said Monday that developments across the strait were difficult to predict. She pointed out, however, that exports were largely unaffected the last time Beijing dramatically increased pressure on Taiwan in 1995 and 1996, even as financial markets and consumer confidence took a hit.

Barring major disruptions to shipping lanes or new trade measures from China, Tsai said Taiwan’s total exports are expected to rise between 8% and 12% in August.

Taiwan is also facing a slowing global economy, which is expected to weigh on demand for its electronic products. Demand momentum from Taiwan’s tech sector will likely slow in the second half of the year as work-from-home tech demand eases, said Grace Ng, an economist at JP Morgan Chase Bank NA.

“There are 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 looks rather concerning, as the level of tech exports appears to have peaked” in the first quarter.

Electronics parts exports rose 15.6% from a year ago, the slowest growth rate so far in 2022. On a monthly basis, semiconductor exports fell 1.8%.

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