Taiwan's exports rise as China offsets U.S. slump

Taiwan's export orders increased in December as demand from China compensated for weakening sales to the U.S.
Orders, indicative of shipments over the coming one to three months, rose 17.56 percent from a year earlier after climbing 17.2 percent in November, the Ministry of Economic Affairs said in Taipei yesterday. That was slower that the median estimate for an 18 percent gain in a Bloomberg News survey of 14 economists.

"China's appetite for Asian exports is very strong and that's good news for Taiwan's growth," said Hsu Kuo-an, an economist at Capital Securities in Taipei, before the data release. "But the outlook is still clouded with stock markets and the U.S. economy worsening every day."

The island's stock index dropped 13 percent this year on concern export demand will ebb as the slump in the U.S. economy spreads. Standard Chartered Bank Plc today cut its forecast for Taiwan's economic growth in 2008 for the second time in two months, citing slowing expansion in the U.S. and China.

The TAIEX index fell 2.3 percent yesterday after the Federal Reserve slashed interest rates amid increasing signs of a U.S. recession.

China, which regards Taiwan as one of its provinces, has growing trade and investment links with the island in spite of a ban on direct transport across the 100-mile Taiwan Strait that separates them.

Rising sales of computer chips and flat panel screens have been a key driver of Taiwan's economy, which grew at the fastest pace in three years in the third quarter. Exports make up about 50 percent of the island's gross domestic product with China and the U.S. the two biggest markets.

Taiwan's orders from China and Hong Kong combined climbed 23.53 percent in December, today's report showed.

Orders from Europe added 9.22 percent and those from Japan advanced 22.71 percent. Orders from the U.S. climbed 9.48 percent.

Electronics orders climbed 18.67 percent, while those for information technology and communications products climbed 5.83 percent, today's report showed.

"Chinese demand is the key for not only Taiwan, but other Asian economies," Hsu said.

Standard Chartered cut its estimate for China's economic growth this year to 9.5 percent from 10.5 percent, its Taipei- based economist Tony Phoo said in an e-mail yesterday.

Phoo expects Taiwan's economy will grow between 2.7 percent and 2.8 percent in 2008, less than an earlier forecast for 3.8 percent amid a "significant slowdown" in overseas shipments.

"A slower external sector, with a high possibility for contraction in the late second half, without any doubt would have a knock-on impact on domestic consumption via the employment sector and investment," he said.

The island's jobless rate already climbed to a seven-month high of 3.95 percent in December as companies pared hiring on concern sales will slow, a government report showed Tuesday.

Taiwan is the most vulnerable economy in the region to a U.S. consumption slowdown," Goldman Sachs Group Inc. economist Enoch Fung wrote in a report on Jan. 14. Goldman also lowered its forecast for Taiwan's economic growth this year, cutting it to 3.8 percent from 4.2 percent previously.

Asia is twice as reliant on exports as the rest of the world, with 60 percent of the region's overseas sales ultimately destined for the U.S., Europe and Japan.

Taiwan's export orders increased 15.54 percent in 2007, today's report showed.

Industrial production gained 10.7 percent last month, less than the 14.8 percent increase forecast by economists. For the whole 2007, factory output rose 7.76 percent.