China’s ‘slowing economic situation’ again hurt Taiwan’s export orders in October
- Taiwan’s export orders totalled US$54.4 billion in October, down by 6.3 per cent year on year
- Orders from Taiwan’s biggest buyer, mainland China and Hong Kong, reached US$10.5 billion last month, falling by 26.7 per cent year on year
Export orders from Taiwan to its biggest market of mainland China and Hong Kong fell for a seventh straight month in October, according to data released on Monday, with analysts pointing to rising levels of inflation and coronavirus-induced weak overseas demand and supply chain disruptions.
Orders to be shipped from Taiwan to mainland China and Hong Kong reached just US$10.5 billion last month, down by 26.7 per cent year on year, according to Taiwan’s Ministry of Economic Affairs.
Taiwan’s orders from mainland China and Hong Kong had already fallen by 27.9 per cent year on year in September to US$11.55 billion.
“The orders from mainland China dropped due to their slowing economic situation … hence weak domestic demand,” said Hu Jin-li, a professor at the Institute of Business and Management at National Yang Ming Chiao Tung University in Taipei.
Chinese manufacturers traditionally buy Taiwan’s exports, such as components for PCs and smartphones, for final factory assembly and re-export, with mainland China the destination for 28.21 per cent of Taiwan’s total exports last year.
The drop in orders from mainland China and Hong Kong contributed to Taiwan’s overall global export orders to considerably miss expectations for a fall of around 1 per cent, instead tumbling by 6.3 per cent to US$55.4 billion in October compared to a year earlier.
The production value of Taiwan’s manufacturing sector probably rose by around 3.7 per cent year on year last month on demand for new consumer electronics, the ministry told the government-run Central News Agency in Taipei.
Hello, Mumbai? Taiwan’s tech firms consider ‘plan B’ amid US-China tensions
But Moody’s Analytics expects industrial production to have fallen 4 per cent year on year in October when the data is released on Wednesday.
“Weakening global demand conditions, as a result of the rises in global inflation and interest rates, will likely further weigh on Taiwan’s trade data [the fourth quarter],” said Ma Tieying, an economist with DBS Bank in Singapore.
“Weakening demand is likely to be more broad based in the fourth quarter, not only from China, but also the major developed markets like Europe and the US.”
Orders for Taiwan’s consumer electronics – the staple of a roughly US$850 billion economy – rose by 9.6 per cent in October year on year, up from 5 per cent growth in September but down from the 15.4 per cent expansion in August.
But orders for optical equipment, which includes phone camera lenses, fell by 43.4 per cent year on year, while plastics and basic metals sustained losses of more than 35 per cent, respectively.
Tech exports have been doing better than non-tech exports so far, but downside risks will likely increase in the fourth quarter due to demand softening, supply glut and rising pressure of destocking in the global semiconductor sector
“Tech exports have been doing better than non-tech exports so far, but downside risks will likely increase in the fourth quarter due to demand softening, supply glut and rising pressure of destocking in the global semiconductor sector,” Ma added.
Orders from Taiwan – for the likes of PCs, servers and smartphones – are seen as a bellwether for the health of other Asian exporters, including South Korea, and an indicator of global consumption trends.
Goldman Sachs said in its 2023 outlook that it is expecting “below-potential” gross domestic product growth of 1.9 per cent next year in Taiwan.
The outlook points to a “slump in external demand weighing on growth momentum early in the year”, with Goldman Sachs adding that export-reliant South Korea and Vietnam are feeling similar headwinds.
