Slowdown in China Hits Taiwan

Taiwan's export orders grew at their slowest pace in more than 5 years in July as demand for technology products, including flat-panel displays, and electrical and machinery goods fell amid the global economic slowdown. Economists said demand's weakened not only from the U.S., but also from China, which had compensated for other export markets. That bodes ill for the island's export-reliant economy in the 3rd-Q. Taiwan's export orders in July rose 5.5% from a year earlier to $31.4 billion, the Ministry of Economic Affairs reported. The growth rate was down from June's 9.3% rise. It was the slowest growth in export orders since May '03's 4.3%. July's export orders will certainly weigh on growth in the third quarter, as economic growth remains reliant on exports for now, and domestic demand won't recover so quickly, said a Singapore-based economist with DBS Bank. July industrial output rose a preliminary 1.1% from a year earlier, the smallest rise in output since March 2007's 0.4% decline. The ministry revised industrial-output growth in June to 5.1%. In July, orders from mainland China and Hong Kong combined, Taiwan's largest export market, rose 1.7% to $8 billion, slowing sharply from June's 17.7% increase to $8.7 billion. Orders from the U.S. in July rose 3.2% from a year earlier to $7.1B, reversing June's 3.9% decline, while orders from Europe increased 15.5% to $5.6 billion, faster than the 9.7% rise in June. Huang Ji-shih, Dir. of the ministry's statistics department, attributed the slowdown in demand from China to stiff competition from mainland industries, which are now producing many of the same products made by Taiwan firms. As China sought to lower air pollution ahead of the Olympics, economists expected closures of factories around Beijing to hurt Asian companies that ship semi-finished goods or raw materials to China for the production of goods to be exported to developed economies.