Chen Cabinet Must Seize the Economic Opportunity
United Daily News editorial (Taipei, Taiwan, ROC)
October 23, 2012
Summary: This week the CEPD will announce its September economic indices. Analysts expect an end to the current run of ten blue lights, the second longest in history. Yellow-blue lights suggest that the economy is about to turn the corner. The global economic recovery has begun. Premier Sean Chen and his cabinet members must use the opportunity to revive the economy.
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This week the CEPD will announce its September economic indices. Analysts expect an end to the current run of ten blue lights, the second longest in history. Yellow-blue lights suggest that the economy is about to turn the corner. The global economic recovery has begun. Premier Sean Chen and his cabinet members must use the opportunity to revive the economy.
Economic indicators for September announced this month suggest an upturn. For example, exports and export orders are bouncing back after six consecutive months of recession. Exports have established new monthly highs. Export oriented industrial production has increased for the past three months. Yesterday's announcement shows the unemployment rate retreating slightly from its seasonal peak. Therefore, as long as financial and consumption indicators do not deteriorate significantly, the indices show a move toward blue lights. Prosperity should be just around the corner. President Ma wanted Premier Chen to produce "tangible" economic improvements within a month. The improved economic indicators from September suggest that the Chen cabinet has squeaked by.
Tangible economic indicators are not always tangible to the general public. To be tangible to the general public, the domestic economy must show clear improvement. All we can say is that the latest index established a bottom. After all, it was only a one month period. One usually looks at three month periods. Will the numbers hold? Or will the bottom fall out? That depends on whether Sean Chen and his team can rise to the occasion and seize the opportunity. They have accumulated eight months of governing experience. They have learned to become effective. They have been decisive in their policy making. They have demonstrated excellent timing.
Consider time and tide factor number one. The cabinet is starting from a low base point. This should give the executive branches' policies time to take effect. The economic indicators have resulted in ten blue lights in a row. Last November we entered a bust period. Hopefully the real economy can maintain current levels during the fourth quarter. Hopefully the deterioration will not spread. Various indicators continue to show growth. They instill confidence in the economy. These indicators are stable. This enables the executive branch to launch its "Exports Proliferation Plan," its "economic momentum promotion plan," and other major policies plans. These indicators have made the claims that we are entering a blue light period more convincing.
Consider time and tide factor number two. Housing market and stock market policy have already accounted for short term dips. These two major markets now offer opportunities for long term gains. The luxury tax, intended to improve the housing market, has been in effect for almost a year and a half. It has discouraged speculative trading. The true market value reporting system for real estate transactions was initiated in October. It has reduced uncertainty. Increasing transparency has facilitated transactions. Supply and demand in the housing market is expected to become more stable.
The stock market is a window on the economy. The economy is poor as a result of international financial shocks and economic fundamentals. It has also been impacted by the PSL tax policy. Both prices and volume have been inhibited. It has also been impacted by the capital gains tax to be levied next year. Policies must be given time to take effect. Investors and funds who had misgivings will then return to the Taiwan stock market, unless they have given up altogether. Therefore the executive branch must seize the opportunity to boost the economy. They must help Taiwan stocks attract investors.
Consider time and tide factor number three. The global economic recovery has begun. This will pave the way for the administration's economic policies. Since the beginning of the year, the performance of four major economies, including the U.S., Mainland China, the Eurozone, and Japan, have been hobbled. Another dip in the global economy could result in new lows. But recent data shows that, the U.S. unemployment rate dropped significantly. Consumer spending has begun to increase. The housing market has also picked up. The Eurozone debt crisis has yet to be resolved. But at least there has been no further deterioration. One issue is the most talked about. Last week Mainland China reported a third-quarter economic growth rate of 7.4%. This was the lowest it has been in seven quarters. But it was in line with expectations. This has greatly reduced concerns that the Mainland economy will experience a hard landing. It is hard to say that the global economy is on the road to recovery. But Taiwan's exports are aleady feeling the warmth. The Chen cabinet has been hobbled by the international situation since it took office. Now however, its hands and feet have been freed. Now it can focus on domestic economic issues.
Leaders emerge in times of crisis. It would be unrealistic to expect the Chen cabinet to immediately offer a comprehensive policy proposal. Sean Chen has introduced quite a few policies during his eight months in office. They include the cross-Strait currency clearing mechanism, a fourth wave of Mainland investments in Taiwan, a cross-Strait service industry agreement, and plans for a free trade economic zone. Hopefully these policies will be implemented as planned. They can inspire confidence and exert a real impact on economic growth.
Sean Chen is seen as a financial wizard. Leaders emerge in times of crisis. We hope he can lead the economy out of the fog.