MACROECONOMICS

• SLOW SIGNS OF RECOVERY

• CHAMBER NEWS: EUSDEN TO BE AMCHAM CHAIR FOR SECOND TERM

CROSS-STRAIT

• LANDMARK “TRACK 2” TALKS CONDUCTED

• FINANCIAL MOU SIGNED

• PANDAS GET A BOOST FOR THEIR LOVELIFE

DOMESTIC

• SETBACK FOR KMT IN LOCAL ELECTIONS

INTERNATIONAL

• TAIWAN FAILS TO ENTER CLIMATE CHANGE BODY

• AIT CHAIRMAN SAYS U.S. POLICY UNCHANGED

BUSINESS

• TAIPEI 101 AIMS TO be GREEN building

• TSMC WINS LAWSUIT OVER CHINESE RIVAL

• MICROSOFT INKS CLOUD COMPUTING MOU
  
  

MACROECONOMICS

SLOW SIGNS OF RECOVERY

Things are looking up. The government’s Directorate General of Budget, Accounting and Statistics said in late November that the economy registered negative growth of only 1.29% year-on-year in the third quarter – after having dropped by 9.06% in the first quarter and 6.85% in the second. DGBAS is forecasting positive growth of 6.89% for the fourth quarter and has revised its GDP growth forecast for the full year to -2.53%, more optimistic than the figure of -4.04% released in August.

Looking ahead to the new year, a DGBAS statement said that “the global economy will accelerate in 2010 (and) Taiwan’s trade sector is expected to stay in healthy shape.” Its 2010 forecast is now 4.39%, up from an earlier figure of 3.92%. The Taiwan Institute for Economic Research made similar predictions in early November, saying GDP would contract by an estimated 2.89% this year before rebounding to 4.21% growth next year, though recovery is expected to be slow and protracted.

Exports, which account for over 66% of Taiwan’s economic activity, climbed for the first time in 15 months, the Ministry of Finance said. At US$20.02 billion in November, export value gained 19.4% from a year earlier. Total imports, at US$17.9 billion, were up 17.9%, with a trade surplus of US$2.11 billion. The high 19.4% figure was attributed partially to a low baseline, as overseas shipments took a record dive in November last year. But the improvement is also attributable to a gradual U.S. recovery and a pickup in demand ahead of the Christmas season. Exports have been making a comeback over the past few months, but previously demand from China was the main driver. Now Western buyers are also slowly becoming more active. Export orders, a sign of shipments to come in the next few months, also improved in October, rising 4.41% on a year earlier, the Ministry of Economic Affairs reported.

Inflation remains relatively low, with the consumer price index expected to fall 0.73% in 2009, before rising moderately by 0.92% next year, the DGBAS said. With inflation continuing to be under control, the Central Bank is expected to keep interest rates low so as to aid recovery, analysts said. The employment situation is also improving; the unemployment rate declined from a record-high 6.13% in August to 6.04% in September and 5.96% in October.

CHAMBER NEWS

EUSDEN TO BE AMCHAM CHAIR FOR SECOND TERM

Alan T. Eusden, president of Corning Display Technologies Taiwan, was elected by acclamation by the AmCham Board of Governors to a second one-year term as chairman of the Chamber for 2010. The other officers for the coming year will be Corning Painter of Air Products as Standing Vice Chairman, George Chao of 3M as Vice Chairman, Li Shin Wang of Johnson & Johnson Medical as Treasurer, and Stephen Y. Tan of Baker & McKenzie as Secretary.

CROSS-STRAIT

LANDMARK “TRACK 2” TALKS CONDUCTED

A prestigious delegation of former PRC officials led by Zheng Bijian, former vice president of the Chinese Communist Party’s Central Party School, and including two retired People’s Liberation Army generals came to Taiwan in mid-November to discuss political and military issues with Taiwanese having close personal and institutional connections to the government. Showing Beijing’s endorsement for the talks, Yang Yi, spokesman for Beijing’s Taiwan Affairs Office, said it would have “positive” significance. But despite Yang’s optimism, the seminar, which was sponsored by the Taipei-based Pacific Cultural Foundation, seemed to be somewhat of a culture shock for both sides, doing little to soothe political rifts. Attendee George Tsai, a political scientist at Taiwan’s Chinese Culture University, said some Chinese scholars were “absolutely shocked” to find that even Kuomin-tang-leaning scholars were critical of Beijing’s cherished “one China principle,” advising that the wording should be excluded from any future bilateral peace agreement. Zheng, for his part, riled many in Taiwan by saying efforts to seek Taiwan independence were doomed to fail. “The gap between the two sides seems too wide to be crossed anytime soon,” Tsai noted. In recent months, Beijing has appeared to be pushing for cross-Strait talks to be widened to include political talks with Taiwan, but President Ma Ying-jeou has said there is no rush to do that.

FINANCIAL MOU SIGNED

The Financial Supervisory Commission (FSC) in mid-November signed three long-awaited memorandums of understanding (MOU) with the Chinese regulatory authorities for banking, insurance, and securities and futures, paving the way for financial institutions on each side of the Strait to have greater access to the other’s financial markets. The agreements – covering such aspects as cross-Strait financial supervision, information sharing, and risk management – take effect in mid-January, after which Taiwanese financial firms may apply to set up shop in China. Concluding the agreements took longer than anticipated. Taiwanese officials had promised in April that they would be signed by June, and progress in integrating the two sides’ financial industries is still likely to be slow. Premier Wu Den-yih told foreign correspondents in mid-December that Taiwan will still bar Chinese banks from acquiring local financial institutions even if the proposed free trade pact – known as the Economic Cooperation Framework Agreement or ECFA – is signed. 

PANDAS GET A BOOST FOR THEIR LOVELIFE

A Chinese expert came to Taiwan in early November to help two pandas at the Taipei Zoo heat up their sex lives. As the bears were showing no inclination to breed, zoo officials sought advice from Zhang Hemin, director of the Wolong Giant Panda Preserve in southwest China, on how to coax this notoriously low-libido species to mate. Zhang expressed optimism that Tuan Tuan and Yuan Yuan might conceive a baby cub in the spring. In additional good news for the zoo, media reports said Taiwan will be allowed to keep any cubs the pair may produce, although the usual practice when China loans its pandas to foreign zoos is for any progeny to be sent back to China. When Tuan Tuan and Yuan Yuan were first offered to Taiwan in 2005, it was considered a symbolic gesture to show Beijing’s intention to improve bilateral ties. Together, their names tuanyuan mean “reunion” in Mandarin Chinese.

DOMESTIC

SETBACK FOR KMT IN LOCAL ELECTIONS

In a setback, the ruling Kuomintang (KMT) lost two seats in elections for mayors and county magistrates. Despite the local nature of the elections, they were seen as a first test for Ma’s presidency, including his policy of engagement with Beijing. The pro-independence Democratic Progressive Party (DPP) won five of the 17 seats up for grabs, adding the county of Yilan to its previous four seats. The party won 45.3% of all votes, up around seven percentage points from similar elections four years ago, against the KMT’s 47.9% share. Although the KMT, with 12, still has the majority of seats, it also suffered another blow by losing the contest in Hualien to a KMT maverick who ran as an independent after being denied the party nomination. The result showed the challenge ahead for Ma in his new concurrent position as KMT chairman, since his preferred candidate was defeated by an enormous margin. In Hsinchu County, on the other hand, a KMT candidate strongly backed by Ma beat a KMT breakaway supported by local factions.

Ma said the outcome of the elections was not “ideal” and constituted a warning for the KMT. The election boosted the prestige of DPP Chair Tsai Ing-wen, who said the results revealed voters’ uneasiness with Ma’s China-friendly policies and dissatisfaction with his administration’s performance. Reporting on its efforts to improve the cleanliness of Taiwan elections, the Ministry of Justice said 174 arrests had been made in connection with more than 2,400 cases of alleged vote buying and election-related violence.

INTERNATIONAL

TAIWAN FAILS TO ENTER CLIMATE CHANGE BODY

President Ma said in mid-November that Taipei could not be officially represented at the United Nations Framework on Climate Change summit in Copenhagen as the foreign ministry had not succeeded in its effort to be admitted as an observer. This result confirmed indications that the diplomatic breakthrough Taipei achieved earlier this year by being invited to attend the World Health Assembly with observer status could not be easily repeated with other international organizations. China-watchers said it seemed as if Taipei had not negotiated the matter sufficiently beforehand with a highly distrustful Beijing.

AIT CHAIRMAN SAYS U.S. POLICY UNCHANGED

Many in Taiwan, particularly DPP members, were nervous about statements made – or not made – by U.S. President Barack Obama during his November trip to China. They noted, for example, that the Taiwan Relations Act (TRA) – the U.S. legislation that underpins the non-diplomatic but high-level relationship between the United States and Taiwan – was not mentioned in a U.S.-China joint statement issued during Obama’s visit, although the America president mentioned it verbally in a press conference afterwards. In fact, as some observers later pointed out, there was no break with precedent, as the TRA has never been mentioned in any U.S.-China joint statement. 

Another Taiwanese concern stemmed from the portion of the joint statement in which the “two countries reiterated that the fundamental principle of respect for each other’s sovereignty and territorial integrity is at the core of the three U.S.-China joint communiqués which guide U.S.-China relations,” especially as China earlier in the joint statement had “emphasized that the Taiwan issue concerns China’s sovereignty and territorial integrity.” U.S. officials later clarified that the reference to respect for Chinese sovereignty and territorial integrity referred to Tibet and Xinjiang, not Taiwan.

AIT Chairman Raymond Burghardt, who is based in the United States, was dispatched to Taipei to brief political figures on the Obama trip. He told reporters that U.S. policy towards Taiwan remains unchanged and that arms sales will continue. Reuters later quoted Robert Kovac, the acting U.S. deputy assistant secretary of state for defense trade, as saying that a proposed sale of UH-60 Blackhawk Helicopters and a contract for design of diesel-electric submarines were progressing towards notification. In addition, he said, the Obama administration is weighing more sales to Taiwan of Patriot “Advanced Capability” missiles known as PAC-3, as well as a deal for operation of the “Po Sheng” (Broad Victory) command and control program.

BUSINESS

TAIPEI 101 AIMS TO be GREEN building

The owner of the world’s tallest completed building, Taipei 101, announced in early November that it would apply for LEED (Leadership in Energy and Environmental Design) certification, which would make it the first skyscraper to obtain LEED Gold certification for an existing building. Executives from the Taipei Financial Center Corp., which owns the 508-meter-tall building, said that to qualify for LEED, Taipei 101 will make hundreds of improvements over 20 months, involving an investment of NT$60 million (about US$2 million). The project aims to cut electricity and water costs by 10% to raise the building’s competitiveness and help the environment.

TSMC WINS LAWSUIT OVER CHINESE RIVAL

Taiwan’s Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest made-to-order chip maker, in early November won a legal victory over China’s biggest chipmaker, Semiconductor Manufacturing International Corp. (SMIC). A jury at the Superior Court of California in Alameda County decided in favor of TSMC after the company sued SMIC in a case charging theft of trade secrets for chip-making technology, patent infringement, and breach of contract over an earlier 2005 settlement between the two companies. TSMC valued the damage to the company at more than US$1 billion. SMIC later said it would seek to reach a settlement, including payment of US$200 million and giving TSMC the right to purchase up to 10% of its shares. TSMC says it will consider buying the shares only if the Taiwan government gives its permission.

MICROSOFT INKS CLOUD COMPUTING MOU

Microsoft Corp.in early November signed an MOU with the Ministry of Economic Affairs to jointly set up a Taiwan research center for cloud computing – an emerging technology enabling users to access data and software stored in remote servers. The center is expected to be set up before the end of 2009. The U.S. software giant did not disclose the size of its investment, but said the venture is aimed at helping local contract makers of electronic products develop equipment and services relating to this new technology.