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August 1, 2013 April 19, 2013
Greater China
Taiwan economic growth beats forecasts Rise in consumer spending drives second-quarter growth
Private consumption contributed 0.87 percentage points to growth
T
aiwan’s economy expanded at a faster-than-estimated pace in the second quarter as domestic consumption improved, even as a slowdown in China damps the outlook for the island’s exports. Gross domestic product rose 2.27 percent from a year earlier after increasing 1.67 percent in the first quarter, the statistics bureau said in a preliminary report in Taipei yesterday. The pick-up in growth came as the island faces increasing risks from China, its biggest trading partner, which recorded a second straight quarterly slowdown. Chinese Premier Li Keqiang’s efforts to rein in a record credit boom and curb housing prices increase the risk of missing the year’s expansion goal, dragging on the global recovery and hurting demand for Taiwan’s products.
In the second half, Taiwan’s “recovery will still be at a very slow pace because of the weakness in external demand,” said Ma Tieying, an economist at DBS Group Holdings Ltd in Singapore. “The slowdown of China is a major risk facing Taiwan because the economy is largely supported by China.” The benchmark Taiex stock index slipped 0.68 percent yesterday. The Taiwan dollar gained 0.2 percent to NT$29.962 against the U.S. currency, according to Taipei Forex Inc. It has declined about 3 percent this year. “Exports and private consumption were a little better than expected but still weak. This is another quarter of below-trend growth for Taiwan at the hand of weak global demand,” said Katrina Ell, an analyst at Moody’s Analytics in Sydney.
Steel demand to remain weak
“Although the whole sector reported low profits in the first half, demand growth for steel products is slower than output growth,” CISA vice-chairman Zhang Changfu told reporters at a news briefing. On Monday, the Ministry of Industry and Information Technology said the debt-to-asset ratio of Chinese steel firms reached 69.4 percent in the first five months of this year, up 1.4 percentage points compared with the same period of 2012. Total debt chalked up by large and mid-sized steel mills between January and May reached 3 trillion yuan, up 6.5 percent from year ago, the report said. It also said that there was unlikely to be any recovery in demand in the second half of this year as China’s economy slows. Overcapacity has long been identified as a major challenge facing the sector, with years of rampant and unregulated growth creating a surplus of around 300 million tonnes. However, steel firms have continued to build new facilities this year. Citing statistics from consultancy Mysteel, the industry ministry said
Demand growth slower than output, industry says
C
hinese steel demand is expected to remain weak in the second half of 2013, the country’s steel association said yesterday, putting further pressure on steel mills struggling with falling prices that have pushed them into the red. The group’s 86 members made a combined loss of 669 million yuan (US$109 million) in June, marking the first aggregate loss this year, the China Iron and Steel Association (CISA) said in its second-quarter report. For the first six months, 35 members were in the red, it said.
Gross capital formation was a negative 0.52 percentage points after adding 1.55 points to growth in the previous quarter. “Business investment was a drag after adding to growth in the previous two quarters. Our full-year 2013 forecast of 2.5 percent looks intact,” she said.
Luxury tax Taiwan in May lowered its official forecast for growth this year to 2.4 percent from 3.59 percent. The economy expanded a seasonallyadjusted 0.59 percent in the second quarter from the previous quarter, yesterday’s report showed. Private consumption increased 1.61 percent in the second quarter from a year earlier, compared to a 0.35 percent gain in the previous
period. Manufacturing rose 1.22 percent from a year earlier, slower than a 1.54 percent pace in the first quarter. President Ma Ying-jeou said in an interview last week that he ruled out driving down the Taiwan dollar to boost exports following the currency’s rally against the yen. He said the government aims for growth of at least 2 percent this year. Overseas shipments, which are equivalent to about two-thirds of gross domestic product, rose a better-than-expected 8.6 percent in June from a year earlier, even as industrial output slipped for a fifth straight month. Export orders, an indication of shipments in the next one to three months, also fell for a fifth month in June. Taiwan earlier let insurers invest in infrastructure projects and created a NT$1 billion (US$33 million) fund to channel money to companies in a bid to spur growth. The central bank held the benchmark interest rate at 1.875 percent for an eighth straight meeting in June, the longest period of inaction. The government is considering tightening luxury-tax rules to narrow the gap between property prices and personal incomes to boost consumption. It is also seeking closer trade ties with other countries to reduce its reliance on China, and earlier this month signed an economic cooperation agreement with New Zealand, its first such deal with a developed country. Bloomberg News/Reuters
Taiwan’s recovery will still be at a very slow pace because of the weakness in external demand Ma Tieying, DBS Group
RMB669 mln Combined loss of CISA’s 86 members in June
in its sector report that as many as 31 new smelters either went into operation or began construction in the first quarter of 2013 alone, involving a total crude steel capacity of 38 million tonnes. Chinese steel firms were not
expected to cut output to reasonable levels because they were still able to maintain small profit margins. Fear of losing market share and worries about banks cutting back credit would also keep production at high levels. Reuters