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Taiwan's economy in 2020 outgrew China for 1st time in 30 years

Unrevised data indicates China's economic growth much lower than officially reported



TAIPEI (Taiwan News) — Thanks to its exceptional handling of the Wuhan coronavirus pandemic, Taiwan's economy grew at a higher rate than China in 2020 for the first time in 30 years — and there are signs the communist country suffered a recession.

Due to Taiwan's swift action to stop the spread of COVID-19 at the very beginning of the outbreak in 2020, the country never needed to enter any form of lockdown, sparing its economy the brunt of disruptions seen in other countries. Despite being the origin of the pandemic, undergoing severe lockdowns, and a massive contraction among all of China's trading partners, China posted positive growth for the year.

Based on official numbers, Taiwan's economy grew by 2.98 percent in 2020, according to the Cabinet-level Directorate General of Budget, Accounting and Statistics (DGBAS). Meanwhile, China's economy over the same period grew by 2.3 percent according to its National Bureau of Statistics (NBS).

Taiwanese statistics official Wu Pei-hsuan was cited by Reuters as saying that this marks the first time that Taiwan's economic growth surpassed that of China for an entire year since 1990. In that year, Taiwan's GDP grew by 5.6 percent, while China's grew at 2.4 percent, followed by three decades of often double-digit growth, never dipping below 6 percent for nearly 30 years.

Taiwan's growth in 2020 has been attributed to the shifting of supply chains from China to Taiwan and increased demand for the country's electronic and telecommunications products. The narrative portrayed by China's state-run media and parroted by Western media outlets has been that China's "rapid recovery" was due to its use of lockdowns to contain the outbreak and the swift ramping up of industrial production and consumer spending.

However, what was lost in the mix was the fact that China quietly revised its key economic indicators for 2019 in spurts to make year-on-year growth rates appear higher. For example, as noted by Barrons, China over the course of a series of revisions in 2020 lowered its 2019 numbers for fixed-asset investment (FAI) by 4.7 trillion yuan (US$729 billion), with the biggest drops taking place in the fall.

Without the revisions that had created a lower baseline, FAI in China should have actually contracted 5.9 percent. The same downward revisions were implemented for total retail sales, providing the illusion of strong growth for every month, starting in August 2020.

However, based on unrevised data from 2019, retail sales in China actually contracted by 4.8 percent or the equivalent of 1.97 trillion yuan. Shehzad Qazi, managing director for China Beigebook, says that surveys of 3,000 Chinese executives carried out last year showed four quarters of contraction in all "key performance metrics, every sector, and all regions."

A survey of 157 Taiwanese companies released by the Chinese National Federation of Industries (CNFI, 全國工業總會) on Oct. 5 found that 80 percent of the Taiwanese firms that participated have reported a decline in their investments and business operations in China, particularly small- and medium-sized businesses. The survey, which was carried out between July 7 and Aug. 25, found the pandemic caused impeded labor flows and logistics, losses of overseas orders, and an inability to perform transactions on time.

The federation said that traditional industries were severely affected by the pandemic, with more than 90 percent having suffered a contraction and 70 percent involved in telecommunications and electronics experiencing a downturn. Despite Beijing's claims of an economic rebound, only 49.2 percent of Taiwanese companies reported a return to 70 percent of production capacity, while 6.9 percent said their plants were still shuttered.

The survey found that nearly 60 percent of Taiwanese companies operating in China had responded to the pandemic by "reducing the scale of production lines and postponing scheduled investments," while others took measures such as "implementing work from home" and "implementing unpaid leave or reducing wages."

Most respondents believe the impact of the pandemic will continue for another half year, and 65.7 percent of Taiwanese companies investing in China believe market conditions in the second half of the year are "not too optimistic" or "extremely pessimistic." Due to the uncertain prospects, nearly 80 percent of responding companies said they will not increase the scale of their investment in China for the next two years.