A Diamond in the COVID–19 Rough? Taiwan Export Orders Surge in March
- Online Date: 2020/04/21
- Modify Date: 2020/06/08
What explains the March 2020 surge in Taiwan's export orders?
Taiwan has already received much of the global spotlight for its adept handling of the coronavirus pandemic, which broke out just across the Strait in mainland China. Taipei, even while excluded from the World Health Organization, took a combination medical, policy, and private sector expertise to the task of containing what could have been a devastating outbreak.
Now, the economic consequences of Taiwan's successful handling of COVID-19 are starting to become clearer. On Monday, new economic data from Taipei showed something surprisingly positive: Export orders were up, with a 4.3 percent increase year-on-year. The surprise was the expectation of most market analysts of a 10.15 percent decline.
The positive turnaround probably isn't explained fully by Taiwan's own internal handling of COVID-19. Yes, last week alone, the country recorded three days where zero new cases of the pandemic were reported. But part of the story with the new economic data likely has to do with importers around the world looking to diversify supply chain risk away from China. It just so happens that Taiwan, with its internal house in order, appears to be a safer short-term bet than Asia's other alternatives, including South Korea, Japan, and Southeast and South Asian countries.
Part of the story is also Taiwan's unique strength in semiconductors and value-added electronics manufacturing. Taiwanese silicon foundries are up and running and, despite a slowdown in everything from commodities to services, demand for semiconductors remains high around the world.
Breaking down the latest numbers from the Ministry of Economic Affairs in Taipei, demand for electronic goods surged by 23.8 percent in March. Electrical machinery saw an 8.6 percent surge as well. Elsewhere, however, Taiwan saw continued declines in demand as would be expected amid a global demand depression due to the pandemic. Categories including chemicals, plastics, metals, and transport equipment saw declines.
Taipei's unexpected export order surge, for the time being, is being largely driven by sustained demand in the United States and Europe. Mainland China, too, continues to be an important destination for Taiwanese exports, accounting for some 7.5 percent of March orders. That too makes sense given the general increase in Chinese productivity in March after a sustained slump through February.
Taiwan's export order data tells us a lot about its potential ability to weather the COVID–19 economic storm, but says little else about other parts of Asia. Despite Taiwan’s significant interconnectedness with global supply chains, the surge in demand for Taiwanese electronics, for instance, is insufficient to infer a broader recovery in global trade.