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Taiwan July export orders fall for 4th month on China downdraft

Friday, August 21, 2015 - 08:54
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Taiwan's export orders contracted for a fourth month in July as demand from China continued to deteriorate, rattling its trade-reliant Asian neighbours and pointing to slower global growth.

[TAIPEI] Taiwan's export orders contracted for a fourth month in July as demand from China continued to deteriorate, rattling its trade-reliant Asian neighbours and pointing to slower global growth.

A shaky economic situation in China, Taiwan's largest trading partner, puts a lid on demand for the island's advanced tech goods and pressures other Asian economies who rely on Chinese domestic spending.

China's yuan, which has depreciated by 2.9 per cent since it was devalued last week, has caused waves around the world as authorities battle a slowdown in the world's second-biggest economy.

Taiwan's Ministry of Economic Affairs said on Thursday it did not rule out a full-year drop in overall export orders, which would be the first in six years. "The weak export orders foretell that exports will remain sluggish not only for Taiwan, but also for the region," ANZ Research economist Louis Lam said in a report.

Orders overall fell 5 per cent last month from a year earlier, worse than a 4.5 per cent decline forecast in a Reuters poll. In June, orders had fallen 5.8 per cent after shrinking 5.9 per cent in May, the fastest pace in more than two years.

Chinese orders slid 14.1 per cent, a deeper fall than previous months. One bright spot was US orders, which rose 10.9 per cent, although those from Japan and Europe fell 8.8 and 3.3 per cent, respectively.

The yuan's fall so far is not having an adverse effect yet and may even be beneficial for contract manufacturers such as Hon Hai Precision Industry Co Ltd, who hire Chinese workers and pay them in yuan. "The yuan depreciation may have some positive impact on tech firms who send goods to China for final assembly," Taiwan's National Development Council Minister Woody Duh said ahead of the data. "In terms of yuan devaluation, it would have to fluctuate from where it is now all the way down by 10 per cent" to have an impact on China's export competitiveness, said William Fung, chairman of Hong Kong-based global logistics and distribution firm Li & Fung Ltd.

Taiwan's export orders, which are seen as an indication of the strength of Asian exports and of global demand for technology, have been weakening after surging last year from strong demand for Apple iPhones.

Slumping orders have hit manufacturers, although many are farmed out to production sites in China operated by Taiwanese tech companies.

Communication-related goods such as phones, smartwatches and servers saw healthy 8.4 per cent on-year growth, the ministry said, and were the only tech category to post gains.

Orders for precision goods such as flat panels tumbled 19.4 per cent, however, amid falling prices.

The government said last week that Taiwan's exports are expected to fall 7.1 per cent this year, the biggest annual drop in six years, with economic growth for 2015 forecast to also hit a six-year low.

The central bank has held its official interest rate but has eased policy by guiding the overnight interbank rate lower since China's devaluation, in a bid to weaken the currency to buffer its economy and exports.

Elsewhere in Asia, South Korea's finance minister said on Thursday that China's decision to devalue the yuan puts"considerable pressure" on South Korea's export-reliant economy due to the global financial turmoil it has sparked.

REUTERS

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