Taiwan’s economy grew faster than that of China for the first time in three decades last year as strong demand for the island nation’s technology exports boosted growth in the fourth quarter.
Gross domestic product increased by 4.9 per cent in the final three months of 2020 compared with the same period a year earlier, taking Taiwan’s expansion over the course of 2020 to 3 per cent, the cabinet’s statistics agency said on Friday. This was a faster pace than the 2.3 per cent full-year growth reported by China.
Wu Pei-hsuan, an official at Taiwan’s statistics agency, said it was the first time the country had outpaced China over the course of a full year since 1990.
It was also Taiwan’s fastest quarterly growth since the first three months of 2011 and well above a market consensus estimate of 3.6 per cent.
Electronic component exports, the lion’s share of Taiwan’s exports, registered a 21.2 per cent jump in the final three months of the year.
In stark contrast to most developed countries, the Taiwanese economy was also boosted by healthy domestic demand due to its successful containment of the coronavirus pandemic; Taiwan has only logged 899 Covid-19 infections and seven deaths. Residents’ consumption in the country increased by 4.3 per cent year on year in the fourth quarter.
“The positive growth, despite disruptions from Covid-19, reflects strong external demand for tech products and well-contained local infection,” wrote Helen Hu, an economist at Goldman Sachs, in a research note.
Taiwan long suffered anaemic growth due to its manufacturing industries’ exodus to China, where cheaper labour and land costs and looser regulation long gave them a cost advantage for export production.
Taiwanese exporters, many of whom are contract manufacturers for US, European and Japanese vendors of electronics goods, were one of the largest investors in China over the past 30 years. But increasing production costs in China, the erosion of incentives Beijing offered in the past and the Chinese government’s support for domestic companies instead have driven Taiwanese companies to divert investment back home and elsewhere recently.
In the past, many Taiwanese were drawn to the economic opportunities offered by China’s dynamic growth. But Beijing’s increasingly hostile attitude towards its small neighbour has cooled that interest.
China claims Taiwan as its territory and threatens to attack it if Taipei refuses unification indefinitely.
Since China locked down entire regions to contain the Covid-19 spread early last year, Taiwanese have returned home and stayed there in large numbers, a trend that has also strengthened the domestic economy.
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