Scholars, industrial leaders air views on NT dollar’s fall

By Ruby Ying, The China Post

The NT dollars sharp fall, Monday, has aroused concern among the island’s economic scholars and industrial leaders.

Wu Rong-I, president of Taiwan Institute of Economic Research, said the plunge of the local currency would trigger a domino effect on other currencies in Asia and raise costs for Taiwan importers. “In the long-term, the drop of the NT dollar is detrimental to the island’s economic development,” said Wu. The local currency dropped more than NT$1 against the U.S. dollar in heavy trading to exceed the NT$34.5:US$1 level, as the central bank abandoned its defense on Monday. The currency picked up yesterday to stand at 34.07 against the U.S. dollar. Wu attributed the recent slump in value of the NT dollar to “slips of the tongue” of some government officials, stressing that the Taiwan forex market is highly sensitive to any news related to the currency’s value.

“Depreciation of the local currency may boost exports in the short run,” Wu noted. “But it will add to the costs of imports of raw materials and capital equipment, which will in turn increase the prices of our export products and impede Taiwan’s export-oriented economy.” For Jeffrey Koo, chairman of the Chinatrust Commercial Bank and the Chinese National Association of Industry and Commerce, the depreciation was acceptable as long as the NT dollar is maintained below 35 against the U.S. greenback. However, Koo stressed that the market has to rebound in the latter half of this year as local electronics manufacturers, the pillar of Taiwan’s economy, have to digest their inventory and pick up more orders from the closures of their U.S. counterparts. Echoing Koo’s view, chairman of the National Association of Small and Medium Enterprises Day Sheng-tout believed that depreciation of the local currency within a certain range could be a boost to national competitiveness.

Nevertheless, Day commented that should the NT dollar falls to 40 against the U.S. dollar, it will result in the collapse of investors’ confidence.

On the other side of the spectrum, Lin Kun-chung, chairman of the Chinese National Federation of Industries was rather pessimistic about the effect of the depreciation.

“A majority of Taiwan’s exporters look to importers for raw materials. So the current values of the local currency will pose a serious burden to their production costs,” warned Lin. As for Wang Ling-lin, chairman of the ROC General Chamber of Commerce, he remained neutral regarding the turbulence in the local forex market. He pointed out NT$34.5 against the U.S. dollar should be the bottom for the local currency. Further depreciation would not only erode the country’s competitiveness, but also raise consumer prices, said Wang.