2020.05 The Taiwan Banker NO.125 / By Hank Huang (黃崇哲)
High Expectations for President Tsai's Second TermEditor's Note
Taiwan’s effective anti-epidemic measures have not only allowed people’s lives to remain relatively unaffected during the COVID-19 pandemic, but also supported the overall economy. Taiwan’s economy has maintained the best growth performance among the four Asian tigers (which also include Korea, Hong Kong, and Singapore). This achievement was made by the current administration, prior to the beginning of President Tsai Ing-wen's second term on May 20. Its vigorous and effective governance safeguarded Taiwan’s interests and laid a foundation for the next phase of Taiwan’s development. Taiwan will face formidable challenges during President Tsai's second term. The coronavirus pandemic has caused a massive global recession that is still snowballing, while the ongoing U.S.-China trade war also threatens economic stability. It will thus be imperative for the new administration to plan effectively for sustained political and economic turbulence. One of the first tasks of its financial team will be to plan a bailout in response to this economic challenge, called the “great lockdown” by the IMF, which includes unprecedented complexities such as reorganization of international supply chains, substantially looser monetary policies, negative interest rates, and an explosion in sovereign debt.An even larger challenge for Taiwan will be to rejig cross-strait economic ties. Predictably, as China's policies harden (taking a "leftist turn" on the Chinese political spectrum) , Beijing will ratchet up economic pressure on Taiwan. Many Taiwanese businesses are heavily exposed to the China market and will depend on the new administration to deploy proactive countermeasures in the event of any change to the economic relationship between the two sides of the Taiwan Strait. Over the past four years, the Tsai's administration's key polices, including the New Southbound Policy, green energy initiatives, the 5 + 2 Innovative Industries Plan, financial supervision, and capital repatriation have borne fruit. The new administration can build upon this solid policy foundation and continue these successful policies. Furthermore, Taiwan’s global profile has risen significantly of late, owing to its increasingly close ties with the US, Australia, and Japan, as well as its donations of medical masks during the pandemic. As a result, Taiwan will have new opportunities amid the global reshuffling of supply chains. Support for the government has reached the highest level in recent years, catalyzed by these election results and the subsequent pandemic. This will allow it to implement policies to give people confidence in consumption and investment even as the crisis rages on. Nevertheless, facing a difficult test covering material that was not in any economics textbook, the administration must unshackle itself from past experience, use innovative thinking to reshape its economic and trade strategies, and approach financial governance from a broader perspective.A rising tide lifts all boats, while a falling tide exposes the jagged rocks. In good times, the going is smooth, but it is only in times of turbulence that a captain can show her calm leadership. Looking forward to after May 20, the new administration will get the opportunity to forge a new path for Taiwan in a rapidly changing world.