Policy Responses from Four Economies
Edited by Daigee Shaw and Bih Jane Liu
Chapter 5: The Impact of the Global Financial Crisis on the Taiwanese Economy and its Industrial Policy in Response
Jiann-Chyuan Wang and Chia-Hui Lin 5.1 INTRODUCTION The subprime mortgage crisis in the US was the prelude to a financial and economic crisis the effects of which have been felt all around the world; countries in Europe and the Americas whose financial sectors had been highly internationalized and whose economies were closely linked to the US were particularly badly affected. As the level of financial internationalization in Taiwan is still relatively low, the extent of asset destruction in Taiwan was limited. However, the Taiwanese economy is heavily dependent on exports, and the destruction of wealth in Europe and North America led to reduced demand for imports, which had a severe impact on Taiwan’s export performance. The financial crisis revealed a number of weaknesses in Taiwan’s industrial structure and the structure of its foreign trade. The fall in the purchasing power of American consumers had an indirect impact on Taiwan’s exports. In the first quarter of 2009, exports fell by over 30 per cent. When to this are added the effects of weak domestic demand, Taiwan’s firstquarter economic growth rate was an unimpressive −8 per cent. The question of how the Taiwanese economy has coped with the recent crisis, and how Taiwan can upgrade and transform its industries so as to protect itself from the impact of a similar impact in the future, is an important one. Under such circumstance, the purpose of this chapter is to analyze the impacts of global financial crisis on Taiwan’s industrial structure and overall economy,...
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