Monthly Archives: August 2011

Taiwan’s Halloween – Ghost Month

In Taiwan, the fifteenth day of the seventh month in the lunar calendar is called Ghost Day and the seventh month in general is regarded as the Ghost Month (chung-yuan chieh). It is a time when deceased ancestors, ghosts and spirits come out from the lower realm. This year, it fell on August 14.

Although it might be likened to Halloween, the Ghost Festival does not have the levity associated with October 31. Instead, the festival has a more somber tone. During the Ghost Month, gatherings are held throughout Taiwan to pray for the disappearance of misfortunes, climaxing on July 15 according to the lunar calendar. Families prepare offerings of foods, fruits, and flowers to worship at temples, as well as for the front doors of homes and companies. Priests and monks at the temples chant for the absolution of the dead persons’ transgression so that their souls may no longer suffer.

The two most popular and important events connected to the festival are the “Flowing Lantern” and “Grappling with the lonely ghosts.” During the first ritual, lanterns and food are placed on paper boats that are released into rivers to flow away, luring the hungry and lonely ghosts back to hell, and an early reincarnation. “Grappling with the lonely ghosts” is another ritual performed during the Ghost Month where five-person teams build a human pyramid in order to struggle up a rope and scamper up a butter-coated pillar. The first person who reaches the top and places a “wind flag” wins the competition.

As is the custom, many Taiwanese avoid making big changes during the Ghost Month in order to avoid bad luck. Almost no weddings are performed in Taiwan during that month, with very few people buying homes or moving.


Photos courtesy of Taiwan’s Tourism Bureau


New Culture Center opens in San Francisco to foster bonds with overseas compatriots

On July 23, Taiwan’s Overseas Compatriot Affairs Commission (OCAC) formally opened the Culture Center of the Taipei Economic and Cultural Office in San Francisco to the public. The new facility located at 739 Commercial Street is a welcome replacement for the Stockton Street center that served the overseas Chinese community until its closure in January 2006.

A history of service

As the founding of the Republic of China (ROC) came about in part as a result of the financial donations made by overseas Chinese communities, the ROC government has always placed a great importance on maintaining strong links with its overseas supporters. In fact, Sun Yat-sen, the founding father of the republic stressed that, “The overseas Chinese are the ‘Mother of the  Revolution’.” Therefore, the existence of the OCAC is a fundamental part of the country’s national policies. Indeed, the OCAC’s pledge to protect and assist the economic development of the overseas Chinese is enshrined in the ROC Constitution.

The OCAC selects one hundred eighty (180) leaders from the overseas compatriot  communities around the world to serve as OCAC commissioners. Their duties are to gauge the feelings of the overseas population and to serve as a bridge between the ROC government and their overseas communities. Also, related laws provide the overseas compatriots with the right to vote in Taiwan and reserve a certain number of seats for overseas legislators according to the proportion of votes in the legislative election.

The OCAC was created in October 1926 and was formally established in April 1932 by the government and relocated to Taiwan in 1949. In 2006, its English name was changed from “Overseas Chinese” to “Overseas Compatriot,” but its purpose remains to provide services to overseas Chinese (hua chiao) communities. It would be difficult to find another country that dedicates a staff of about 350 towards serving the needs of its overseas compatriots.

There are two distinct groups of overseas compatriots – the early emigrants (traditionally from China) and newcomers (mostly Taiwanese emigrants). They may have different backgrounds, but they are all served by the OCAC as long as they recognize and support the ROC government in Taiwan.

In the Bay Area, most of the traditional overseas Chinese communities live in San Francisco. Their families moved to the US mainly from Guangdong Province during the late Qing Dynasty and they predominately speak Cantonese. However, the new emigrants from Taiwan mostly settled in the South Bay. Many of them came to the US to study for advanced degrees starting in the 1960s, while others were attracted by the hi-tech opportunities and community in Silicon Valley. These newer emigrants mainly speak Mandarin or Taiwanese.

In March 1985, the OCAC established its first overseas center in San Francisco.  Given Sun Yat-sen’s connection to the Bay Area and the support he received to establish the Republic of China one hundred years ago, it is perhaps not surprising that San Francisco was the location for the OCAC’s first center in the United States. Today, the OCAC has 17 centers around the world.

The new center

According to Abraham Li, the director of the newly reopened Culture Center in San Francisco, when Chinese people immigrated to the United States, they still consider themselves Chinese. Li illustrates this by saying, “Even when they go overseas, they still think of their homeland and want to be buried there. It is quite special. In this, they are unlike other immigrant groups.” Li moved to San Francisco about a year ago and has worked in centers in New York City, Los Angeles and Chicago, before assuming his position here.

“Chinese Culture is very family-oriented. Even if you are an ABC (American-born Chinese), you are still Chinese. Parents view their kids as Chinese rather than American.” Given this mentality, there are about a thousand thriving Chinese language schools in the United States that the Culture Center supports through its eleven centers throughout the country.

Even located in a quiet alley, the San Francisco center has received a steady flow of traffic since it opened a month ago. “What we do is very important and comprehensive,” said Li “We provide Chinese newspapers and other publications, have a library, and offer meeting and activity rooms to our users. Importantly, we train teachers and provide textbooks to students learning Chinese.” Due to its location in downtown San Francisco, the area’s rent makes it prohibitive to have a larger facility.

Gradually, the center will build a range of tailored programs as it welcomes more customers to make use of the center’s facilities. Right now, Li is considering turning the basement room into a computer center offering IT classes and internet access.  Since the bulk of the center’s users are older Cantonese-speaking male retirees who visit mainly during weekdays, Li is careful to consider programs that will meet the needs of the center’s demographic.

The Culture Center in Sunnyvale

An hour’s drive from Chinatown is the Culture  Center in Sunnyvale. Located in suburbia, the 10,000 square-foot center is significantly bigger with a parking lot and a range of meeting rooms. In Sunnyvale, many of the center’s users work during the week so the center comes alive on weekends with BBQs, classes, dances, performances and parties. The Sunnyvale center receives so much foot traffic that its users have lobbied OCAC for a larger facility, better able to host performers from Taiwan and locally.

This month, the search for a new space began in earnest with an open bidding process for real estate agents from San Mateo, Santa Clara and Alameda Counties. The OCAC has allocated US$5 million for the purchase of a new property and another US$2 million to renovate the space so it can accommodate more meeting rooms, an expanded library, a conference area, media center, large hall for banquets and conventions as well as an 800-seat auditorium. The new space needs to be at least double the size of the current center, but no more than triple its existing size.

Overseeing the search is the new director of the Sunnyvale center, Roy Yuan-rong Leu, who arrived earlier this month. Leu is no stranger to the Bay Area, having worked in the Sunnyvale center from 2002-2005, before returning to Taiwan for three years. Prior to his assignment here, he worked in the New York City center.

When asked why the two centers were so noticeably different in size, Leu explained that San Francisco has had Chinese associations for a long time. These associations own plenty of property at various locations. When they want to have a meeting or convention, they don’t need to find a place. Instead, the San Francisco patrons need information and contacts. “In comparison, we serve new immigrants who don’t have associations. They don’t have their own space or a building…That’s why new immigrants need a place to meet.” Other than that, the services offered are the same, which is to serve as a liaison in fostering strong bonds between the compatriots here and the Republic of China, according to Leu.

The Culture Centers do this by providing services and programs to invite overseas Chinese to return home, invest in Taiwan and offer activities to help keep them connected. Their activities include Chinese schools, costume lending, library services, facility rental, teacher training and a host of social activities. For the younger generation of ABCs, this includes sponsoring Chinese language classes and camps in the United States and in Taiwan.

Among one of the Culture Center’s popular programs aimed at young adults is the Expatriate Youth Taiwan Summer Camp, which is organized and subsidized by the OCAC. The month-long camp combines educational classes, field trips and an island-wide tour of Taiwan. It is a great bargain for young people (aged 16-27) who wish to experience something new, explore the island and learn about their cultural roots.

According to the OCAC, there are about 35 million ethnic Chinese people living overseas (excluding Hong Kong and Macau), with about five million of them residing in the United States and Canada. The San Francisco Bay Area is home to approximately 700,000 of them. For more information about OCAC programs, please visit their website: The San Francisco Center is open Tuesday to Sunday, 9am to 5pm, and the Sunnyvale Center is open Tuesday to Sunday, 9:30am to 5:30pm.

Sun Yat-sen exhibition at Cal State Capitol, August 29 – September 23

Born at a time when imperial China was weak and profoundly humiliated by Western powers, Sun Yat-sen vowed to restore his people’s national pride and to establish an American-style government. It would take him 30 years – half of it in exile – before he established the Republic of China. He visited the United States four times, staying mainly in northern California, to promote his revolutionary cause. His vision in turn paved the way for Taiwan’s transformation into a democratic society.

On the 100th anniversary of the founding of the Republic of China, please visit the Eureka Room (Capitol Basement) in the State Capitol (10th Street and Capitol Mall, Sacramento) to learn about Sun’s influence on the Chinatowns of northern California and his role as the father of the first democratic republic in Asia.

The exhibition is sponsored by the Speaker pro Tempore Fiona Ma, the Asian and Pacific Islander Legislative Caucus, the Taipei Economic and Cultural Office in San Francisco, the Chinese Benevolent Association of Sacramento, the Government Information Office of the Republic of China (Taiwan), National Sun Yat-sen Memorial Hall (Taiwan), and the Kuomintang Party Archives Library (Taiwan).

The exhibition is free to the public.

Taoyuan team wins Bronco World Series

On August 11, Taiwan beat Florida to win the 2011 Pony Bronco World Series. The game was dominated by pitcher Chiu Chi-liang, who led the Taoyuan county team to a 10-0 victory over Tamiami, Florida. The game was called after five innings due to the 10-0 mercy-rule, which avoids humiliating the losing team.  Held in Monterey, California, Taiwan last won the championship in 2000 with a team from Tainan City. Since 1994, Taiwan has won five Bronco titles.

Things looked dire for Taiwan at the top of the first inning when the bases were loaded, but Chiu did not yield a run. Then the Taoyuan team scored five runs in the bottom of the first inning, paving the way for the landslide victory.

Chiu pitched almost the entire time, giving up just two hits and striking out nine players. In the whole tournament, he pitched 14 innings, only losing one score, and was named the most valuable pitcher of the 2011 tournament. Chiu said he wants to continue pitching with the hope of one day pitching in the US Major Leagues.

Taiwan team manager Lee Cheng-ta told the Central News Agency that Chiu’s outstanding performance and the team’s five run burst at the bottom of the first inning were the keys to the victory.

Director General Jack K.C. Chiang of the Taipei Economic and Cultural Office in San Francisco cheered Taiwan’s 11 and 12-year old players and read a congratulatory message from Taiwan’s President Ma Ying-jeou afterwards, reported the World Journal.

Taiwan seeks innovation venture capital ties

On July 30, Tsay Ching-yen, the chairman of Taiwan’s Industrial Technology Research Institute (ITRI), told the Monte Jade Taiwan – Silicon Valley High Tech Forum about Taiwan’s efforts to cooperate with international venture capital funds in the field of technology innovation. He touted Taiwan by saying the island provides a “combination of the innovation of Silicon Valley in the US, the R&D of Taiwan’s Industrial Technology Research Institute (ITRI), and the efficiency of Taiwan’s high technology companies, creating a win-win-win situation.”

Tsay pointed out that there are three key elements in Silicon Valley’s innovation ecosystem: commercialization of knowledge, incubation of knowledge and the adding value to knowledge. The interaction among these three areas brings in new ideas, companies and technology, resulting in truly innovative products and services.

“ITRI also provides a complete environment in these three areas,” said Tsay. ITRI has close cooperation with the Hsinchu Science and Industrial Park, National Tsinghua University and National Chiao Tung University, providing a quality environment for the “incubation of knowledge.” At the start of 2010, there were 5,636 R & D personnel in ITRI, 22 percent with PhDs. ITRI owns a total of 15,721 patents, with almost one-third granted in the United States. The institute currently provides services to 15,139 companies and has 695 cases of technology transfer.

In the area of adding value to knowledge, Tsay said ITRI provides private companies with early stage business development, helping them with commercializing intellectual property and technology, and offering them laboratory technology and business incubation services. Since its inception in 1973, ITRI has successfully assisted more than 21,000 manufacturers and technology companies, including UMC, TSMC, Taiwan Mask Corporation, Rechi Precision, DelSolar, Vanguard International Semiconductor Corporation (VIS), SunPlus and other internationally renowned companies across various industries.

In the area of knowledge commercialization, Tsay said that the Industrial Technology Investment Corporation (ITIC), set up by ITRI in 1979, is a venture capital firm specializing in the transfer and commercialization of technology in Taiwan. The difference between ITIC and other VC funds is that ITIC has access to ITRI’s resources, network, professional incubation assistance, as well as longstanding industry connections, he said.

As a non-profit research organization, ITRI has an exceptional record of helping companies to commercialize their technology, and is the best choice for international start-up companies seeking to bring their products to market, Tsay concluded.

Taiwan team wins medal at National Geographic Championship

For the first time, Taiwan’s three-student team made it to the finals of the National Geographic World Championship winning the bronze medal on July 27. This year’s finalists also included a Canadian team, who won in 2009, and a team from Russia. Ultimately, the Russian team dominated and took home the World Championship gold medal following the face-off at Google’s headquarters.

The event started with a welcoming address given by the CEO and chairman of the National Geographic Society, John Fahey and the vice president of Google Earth and Maps, Brian McClendon. The competition was moderated by Alex Trebek from the popular TV quiz show “Jeopardy!”

This was the fourth time a team from Taiwan has participated in the Geo Bee, but the first time Taiwan has reached the finals. The students’ teachers said that this year’s team was the most outstanding since Taiwan began competing in 2005.

Cheering the team from the sidelines was the director general of the Taipei Economic and Cultural Office in San Francisco, Jack Chiang. He delivered President Ma Ying-jeou’s congratulatory letter to the team and added, “Our team has already beaten 15 other teams to reach the finals. This is a clear indication that the younger generation in Taiwan has a broader perspective and is a sign of Taiwan’s internationalization.”

New F-16s for Taiwan would create over 87,000 US jobs

Faced with China’s rapidly expanding military, Taiwan urgently needs to buy new F-16 fighter jets to maintain the peace and stability in the Asia-Pacific region. If Washington rejects the jet deal, the US will eventually need to send its children to perform this duty, said Taiwan’s Deputy Defense Minister Andrew Yang.

In an August 8 interview with the Springfield, Virginia-based Defense News, Yang said Taiwan is certainly aware that Beijing has  become an important global and regional power, sharing close mutual interests with the US. Beijing is increasing its influence over Washington’s decision-making not only over Taiwan, but over other important regional and global issues.

But, he said, “We firmly believe that Washington still plays great influence in Asia and has repeatedly made strong commitments to regional security. Taiwan is a very important factor contributing to the multilateral effort to preserve peace and stability in this region.” And under the Taiwan Relations Act passed by Congress in 1979, the US is obligated to sell Taiwan defensive weapons.

Despite improving relations with Beijing in recent years, China still keeps 1,400 short-range missiles aimed at Taiwan, and has increased its military budget by nearly 70 percent in the last five years. The island’s old F-16s purchased from the US twenty years ago are no longer sufficient to maintain air superiority in the event of a Chinese attack. As such, President Ma Ying-jeou has repeatedly sought to purchase the new F-16 C/Ds so that his government can negotiate with Beijing from a position of strength.

The Obama administration is to announce its decision about the sale of 66 new F-16 fighters to Taiwan by October 1. Previous experience have shown that if such a purchase were to take place, Beijing would briefly downgrade its relations with Washington before returning to normal based on their mutual binding interests, said Yang.

According to a comment in The Wall Street Journal, if Washington gives in, China will conclude it can intimidate the US from assisting its allies, threatening Taiwan’s democracy and extolling a heavy price on the US eventually. “Preventing the Taiwanese military from catching up with the mainland now could put a future US President in a difficult position. In the case of an attack, he would face the awful decision of whether to sacrifice American lives to defend the island” or let  American allies conclude US security promises are meaningless.

The new F-16s would make this dilemma less likely since it would provide Taiwan with the ability to defend itself long enough for the US to resupply the island with arms without getting directly involved in the fighting, said The Wall Street Journal.

Besides political reason, there are economic factors as well. A study by the Perryman  Group commissioned by the US-Taiwan Business Council found that the F-16 order  would create over 87,000 person-years of employment for US workers.  Without Taiwan’s  order, the F-16 assembly line would close in 2013, reported The Wall Street Journal.

Presidential election takes to social networking

In the age of digital media, Taiwan’s 2012 presidential candidates have prepared themselves to do battle in the labyrinth of social media networks. President Ma Ying-jeou of the Kuomintang (KMT) and Tsai Ing-wen of the Democratic Progressive Party (DPP) have readied their campaigns to appeal to “digital natives,” voters who were born in the 1980s. These natives can mobilize their power in a virtual world of technology by cross-using new media such as Plurk, Twitter, Facebook, and Youtube to set off a revolution in the real world.

Chen Shun-shao, associate professor of Journalism and Communications at Fu Jen Catholic University, told Commonwealth monthly that it used to be hard for social media to influence political power in Taiwan, but now it is the norm. The appearance of social networking media has changed and transformed today’s political campaign strategies.

President Ma’s campaign not only named their office “Taiwan Cheers, Great,” (a pun meaning “Like” as in checking the “Like” icon on Facebook), but also announced the establishment of a New Media Department on July 12.

Both candidates are adept with PDAs and social networks. DPP Chairperson Tsai Ing-wen turns on her BlackBerry or uses her iPad to check her Facebook account. President Ma is also a Facebook user. If he sees any issues in his account, he will call Wang Yin-xuan, his new vice superintendent in the New Media Department. The two presidential candidates want to tap into the thinking and activities of Taiwan’s “digital natives.”

Wang said it is not enough to ask them to “please vote for me,” you have to play with them by adopting their habits. Chin Zhi-yu, 30, superintendent of Ma’s New Media Department said, what they want to do is to listen to everyone’s opinion by way of music or chatter through the social networking media. After all, much of their creativity originates from surfing the net. “We even welcome the visits of those who don’t like us,” said Chin.

Besides sharing his personal opinions on Facebook, President Ma has started using Plurk and Twitter as well, reported the Taipei-based China Times. Lee Chia-fei, spokesperson for Ma’s campaign office, said that sending out a large amount of short text messages through these two network platforms enables more people to relate to him.

Lee Hou-ching, press director of Tsai’s election campaign office, told Commonwealth that new media is not just a tool, it is has the influential power of integrating marketing strategies from video, Facebook, Plurk, text messages and news through smart phones. Another DPP official in charge of new media said those who are attracted via the internet are almost always between the ages of 25 to 30. They are young office clerks, new college graduates, executives, attorneys and other professionals, people not reached by the DPP’s traditional campaigns.

According to the web traffic monitoring site “2012 Presidential Election Fans Station,” the DPP which once led on the internet now falls behind the KMT. Tsai currently has 320,000 Facebook fans while President Ma has 850,000, according to a recent United Daily News article.

The internet is not a propaganda tool for political parties, but a way for net surfers to participate in the political process and influence party decisions, Commonwealth stressed. Taiwan’s presidential election is scheduled to be held in conjunction with the legislative elections in January 2012.

Taiwan embraces wind and solar power

Following  the nuclear catastrophe at Japan’s Fukushima power plant after the country’s devasting earthquake in March, anti-nuclear groups in Taiwan asked the government to suspend operations at No. 1, 2, and 3 nuclear plants, pending a full safety inspection and assessment. Taiwan’s Ministry of Economic Affairs responded by saying that to close the plants would result in the shut down of one-quarter to one-third of the island’s manufacturing sector, according to Taiwan Panorama. The two sides remain in disagreement over Taiwan’s current power capabilities.

Does Taiwan have enough power?

In disputing the Ministry’s claim, the groups have said that the electricity operating reserve margin was 24.3 percent in 2010. If all three nuclear plants stopped operating, the reserve margin would still be at 10 percent. Supply would be more than enough and there would be no crisis, they claimed. Environmental groups have noticed there has long been a disconnect between economic growth and energy consumption in advanced industrialized countries. With policies promoting clean energy, research into energy technologies, energy conservation, and industrial restructuring, economic growth no longer aligns with restricting greenhouse gas emissions.

Former Premier Liu Chao-shiuan has concurred by stating that plans for developing alternative energy sources should always be adjusted to include the latest technologies. Over the next 15 years, he hopes Taiwan’s renewable energy capability will grow to more than 10 GW and that industries will become more energy efficient.

Upping wind power to 10 percent of total electricity production

As for alternative energy, wind power is currently the most mature of the renewable energy technologies. It is also the most price-competitive with fossil fuels, being both clean and cheap. As of 2010, there were nearly 200 70-meter tall wind turbines in Taiwan. With a combined capacity of about 300 megawatts, or about 1 percent of the total power produced in Taiwan. The Industrial Technology Research Institute (ITRI) and Germany’s InfraVest Wind Power Group forecast a growth potential of at least 10 to 16 times, reported Taiwan Panorama.

In addition to its onshore capacity, Taiwan also has the potential for offshore wind farms. Some 18 firms involved in wind farm development, turbine component manufacture and maritime construction have formed a Taiwan Offshore Wind Alliance to develop three offshore sites, the first of which will set up 60 giant wind turbines. Because offshore winds are stronger than those onshore, the government plans for an installed capacity of 3GW by 2025, accounting for about 10 percent of Taiwan’s total power generation.

The Penghu islands, located in the Taiwan Strait, possess excellent wind resources which can transform them into a “low carbon emission” group. The local government plans to form a joint venture with the private sector to develop a four-stage wind turbine installation program that will install 124 MW of capacity by 2015, enough to provide for the needs of its 50,000 residents. Once the program is complete, the Economics Ministry will build a 60-kilometer high voltage undersea cable to connect the wind farms to Taiwan’s grid.

Germany’s InfraVest jumps ahead

Since 2000, InfraVest has invested tens of billions of NT dollars importing large turbines to set up wind farms in Taiwan. As the first company to develop wind farms in Taiwan, InfraVest’s facilities far outperform those of Taipower and helps to drive positive competition in the island’s wind power sector, according to Taiwan Panorama.

Though many are looking forward to the development of wind power with great anticipation, environmental groups are cautious about the rollout of large turbines. Taiwan is the stopping-off point for many migratory birds from Siberia and the Southern Hemisphere. The air currents created by rows of giant turbines along the west coast could potentially disrupt the birds’ transit and rest, besides threatening the already endangered Chinese white dolphin.

Germany’s technology and expertise with giant turbines far outpaces Taiwan’s, although Taiwan hopes to compete by producing small and medium-sized wind turbines, which it sees as the future direction for wind power. Taiwan’s Hi-VAWT has received the world’s first international certification for a vertical-axis wind power system. In addition, it owns patents on many small wind technologies and has a solid supply chain.

According to Taiwan Panorama, solar power is well suited to high population density areas like Taiwan. As technology improves, the conversion rate of solar cells – the percentage of sunlight converted to electricity – has also improved and driven down costs. Currently, Taiwanese-produced monocrystalline silicon solar cells have reached a conversion rate of 19-20 percent, an admirable figure, while polycrystalline cells are at 16-18 percent and thin-film solar cells are at 10 percent.

Power diversification essential: economics minister

In addition to improvements in the conversion rate, the variety of options for solar power generating equipment has continued to grow in recent years. When Kaohsiung National Stadium opened for the 2009 World Games, it became well-known for being the island’s single largest generator of solar power. The stadium can seat 40,000 people, while its 20,000 square-meter roof – almost 70 percent of it made from 8,000 solar panels – can generate 1.1 MWh of electricity annually. When the stadium hosts events, these panels can supply as much as 80 percent of its power needs, and when not in use for events, the stadium is completely self-sufficient in terms of electricity. With its solar panels designed and built by Delta Electronics, the stadium is the world’s largest sports facility powered by renewable energy.

Taiwan leads the pack in terms of solar energy innovation. The problem is the next step, promoting and developing the domestic market for the technology. Solar power is well suited to small-scale generation of renewable energy, and Taiwan not only has the edge in terms of production technology and sunlight hours, but also laws and incentives that are already in place.

Electric power is the foundation for economic development. After decades of construction, Taiwan has a very complete electricity transmission and distribution system, and power facilities are quite diverse. In general, there are three types: thermal, nuclear, and renewable. Each has its positives and negatives.

Because each type of energy has pros and cons, it is necessary to maintain diversification and the proper composition of the structure of power supply to ensure a safe and reliable supply, lower carbon emissions and competitive prices, said Shih Yen-shiang, the Minister of Economic Affairs, in an interview with Taiwan Panorama.

He added, the composition should be adjusted over time. In 40 to 50 years, when the technologies for storage of renewable energy and smart power grids are mature, the proportion of renewable energy will increase to around 20 percent of Taiwan’s total power generation.

Taiwan prepares to ward off US credit crisis

In light of the recent downgrade in the credit rating of the United States by Standard and Poor’s, together with continued global stock market fluctuations, President Ma Ying-jeou stressed that Taiwan’s government will do everything in its power to reduce the negative impact of these ripples on Taiwan’s economy. On August 6, the president urged investors to have confidence, and not to panic.

President Ma said that with an export-oriented economy, Taiwan is tethered to changes in the world, and is inevitably linked to the impact of global stock market volatility. However, Taiwan has a fundamentally sound economic system that will sustain an economic growth rate of up to 5.01 percent this year, better than the global economic forecast. Taiwan will bear zero foreign debt in September, so that the people of Taiwan need not be concerned, he said.

The Economic Daily News reported that Christina Liu, chairperson of the Council for Economic Planning and Development (CEPD), said the US credit rating downgrade “is a new event, but contains no new message.” The downgrade has been expected because the US has been suffering a serious debt problem, without a viable deficit reduction plan for some time now. She pointed out that in the past Taiwan relied mainly on exports for economic growth and was hit hard by the global financial crisis in 2008. However, this is no longer the case. Taiwan has adjusted itself in the past two years and although it still might feel the impact of US and European economic developments, the island will not now be as hard hit by international market jitters.

Chou A-ting, deputy governor of the Central Bank of Taiwan, told Commonwealth magazine that US Treasury bonds remain the most circulated bonds in the world. The US credit rating downgrade may cause short-term price fluctuations, but will not shake Taiwan’s financial stability.

The Economic Daily News reported the Ministry of Finance had stressed that Taiwan’s national debt situation is healthy compared to that of other countries. In comparison, the balance of government debt in the United States and Japan  accounts for 91 percent and 220 percent of GDP respectively. The debt limit of the majority of European Union members is over 3 percent, while Taiwan’s deficit accounts for only 2.4 percent of its GDP. Meanwhile, Taiwan’s government debt accounts for less than 40 percent of its GDP, within the debt limit range of 48 percent allowed by law. This is not only way below that of the United States or Japan, but also considered financially healthy when compared with that of Singapore, South Korea and other neighboring Asian countries.

Global View monthly reported that Taiwan holds US$150 billion of US government bonds, mostly in the central bank, ranking the sixth highest holdings in the world. Liu said, Taiwan should increase cooperation with other Asian countries to build a “common defense” of financial security so as to reduce the dangers associated with more American hot money being printed by the US government, particularly as Taiwan is not able to rely on the international safety net due to the lack of membership in financial security organizations like the International Monetary Fund.

In an interview with Commonwealth magazine, Liu said that the electronics industry, which played an important role in Taiwan’s economic growth in recent years, continues to be impacted by the US financial and economic instability. The government of Taiwan should work together with industry to accelerate industrial restructuring, to diversify markets beyond the US,  Europe and East Asia. It should also look beyond the current OEM technology industries and prepare for the next wave of industries.

Global View noted that the misconception that a state cannot collapse has already been disproved. But once the state goes into bankruptcy, the real victims are its people. Cheng Cheng-mount, chief economist of Citigroup in Taiwan, warns that Taiwan has a tendency to expand government spending and increase social welfare funds regardless of which political party is in control, adding that “when extended to the limit, the government will not be able to afford its debt, and the burden will fall on its citizens.”