Pedestrians cross the road in Taipei, Taiwan, Monday, January 15, 2024.
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The company said: “If China bans major imports and exports and imposes customs and quarantine measures that allow only essential food and fuel into the country, supply and social unrest could result. Such a scenario could result in This will probably lead to a devaluation of the currency.” The Taiwan dollar affects both the real estate market and the stock market. ”
But Alicia García Herrero, chief economist for Asia Pacific at Nataxis, said Taiwan could see rapid growth in 2024 as mainland China remains Taiwan’s biggest export destination despite the tensions. It is expected that this will be a tailwind for the government.
Amundi warned that the possibility of a temporary economic blockade against Taiwan could spook markets.
The report states that a more extreme scenario, such as a complete lockdown banning all imports into Taiwan, would trigger a regional “risk-off” phenomenon, severely impacting Asia’s stock and real estate markets, and leading to foreign exchange shortages. He said it would be connected.
Gabriel Wildo, managing director at global business advisory firm Teneo, said a blockade was “not out of the question” but “very unlikely”, adding that Kiyotoku Lai of the Democratic Progressive Party has a history of pro-independence statements. However, he added that his statement was “very unlikely.” The presidential campaign was considerably subdued.
China has rejected Taiwan’s election results, saying the Democratic Progressive Party does not represent mainstream public opinion.
On January 13, Taiwan announced an unprecedented third term as president to Mr. Lai of the ruling Democratic Progressive Party, who is considered a China-skeptic.
Wildau said the base scenario for Taiwan would be a continuation of the status quo, “characterized by regular military exercises near Taiwan and Beijing’s refusal to engage directly with the Democratic Progressive Party-led government.”
The Chinese government will monitor Mr. Lai’s statements and actions until he takes office on May 20 and issues a complete response, he wrote in a Jan. 14 report.
“For at least his first year in office, if not his entire term, we expect Mr. Lai to emphasize continuity with President Tsai and avoid dangerous provocations, so we expect Beijing to use blockades and other emergencies.” We do not anticipate that they will feel compelled to respond with aggressive behavior.”
His view was echoed by the Economist Information Bureau, which said in a Jan. 15 memo that both Taiwan’s declaration of independence and China’s invasion of Taiwan remain unlikely.
However, the report added, “Due to questions surrounding Lai’s presidency, risk concerns regarding Taiwanese assets may remain in the first half of 2024.”
Although the Democratic Progressive Party won the presidential position, it lost its majority in the Legislative Yuan (Taiwan’s parliament).
The party won only 51 seats in the Legislative Yuan (constant number of 113), the opposition Kuomintang (KMT) secured 52 seats, and the Taiwan People’s Party (Taiwan People’s Party) secured 8 seats, making it virtually certain that the parliament would be split.
Nataxis’ Herero said there will be extensive discussions among Taiwan’s political parties for policy changes, and there will likely be negotiations between mainland China and Taiwan’s opposition parties, with the ruling government He said there could be pressure to seek further dialogue with the US.
Teneo’s Wildau said the Chinese government will likely continue to refuse formal dialogue with the Democratic Progressive Party’s government, but it may pursue dialogue with Kuomintang leaders.
Wildau said the Chinese government will restart negotiations over the stalled Cross-Strait Trade in Services Agreement and Cross-Strait Trade in Goods Agreement, negotiated in 2013 by the Kuomintang government to liberalize trade between Taiwan and China. He added that there is a possibility.
However, CSSTA was not ratified by Taiwan’s parliament in 2014 because it sparked protests by Taiwanese students and civil society groups known as the Sunflower Student Movement.
Wildau said this could provide an opportunity for the KMT to prove it is more capable of bringing economic benefits from the mainland than the DPP.
In order to reduce Taiwan’s economic dependence on China, the Democratic Progressive Party under the Tsai administration is proposing the “New Southbound Policy,” which aims to strengthen trade and exchanges with 18 Asian countries, including the ASEAN region.
In 2023, Taiwan’s investment in countries under the New Southbound Policy will exceed investment in China, reaching $2.126 billion, compared to $1.9 billion in the first half of 2023. It was reported that
Nataxis said “much more” investment from Taiwan went to the United States compared to China.
But diversification efforts may face a setback as the Democratic Progressive Party loses full control of the Legislative Yuan (Taiwan’s parliament).
Analysts at Amundi were less optimistic about diversification, saying: “Economic disengagement from mainland China and lack of sufficient compensatory support suggest reduced long-term growth potential for Taiwan. ”.