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Taiwan’s pro-growth policy to continue after Tsai election win as supply chains shift in US-China trade war

Taiwanese president Tsai Ing-Wen (center) thank her supporters at the victory rally after winner the election. The president of Taiwan Tsai Ing-wen won a landslide victory in the 2020 presidential election by securing over 57% of the votes beating her major opponent Han Kuo-yu who only secured 38% of the votes.

Chan Long Hei | SOPA Images | LightRocket | Getty Images

Taiwan’s Tsai Ing-wen is expected to continue her pro-growth policies after a decisive victory in the self-ruled island’s presidential election on Saturday, an entrepreneur said on Monday.

Incumbent Tsai of the independence-leaning Democratic Progressive Party (DPP) secured a second term with 8.2 million votes — the most any leader has secured since Taiwan held its first direct presidential elections in 1996. Her 57.1% share of votes compared with 38.61% or 5.5 million votes for her closest competitor Han Kuo-yu of the Kuomintang or Nationalist Party, according to Taiwan’s Central Election Commission.

Tsai’s weekend win was aided by concerns over mainland Chinese influence that spilled over from long-drawn anti-establishment protests in Hong Kong and her pro-growth policies are expected to continue, said Steven Pan, executive chairman of Silks Hotel Group and Formosa International Hotels.

“That policy we expect to carry forward with even more force with the return of Taiwanese companies and capital from decoupling (due to) the trade war,” said hotelier Pan.

Tsai’s win was a dramatic turnaround from end-2018 when the independence-leaning DPP lost several important cities in mayoral elections partly attributed to unpopular reforms in the state pension system. The DPP also retained its majority in the legislature in elections that took place concurrently on Saturday.

Since end-2018, Tsai has shifted her agenda from one focusing on social reforms to a pro-growth one, which has helped the economy at an opportune time for her administration. That is as global supply chains are shifting due to the U.S.China trade war, that has benefited democratic Taiwan, said Pan.

Taiwan posted 2.91% on-year GDP growth in the third quarter of 2019, bucking the sluggish trend displayed by trade reliant Singapore, South Korea and Hong Kong. The four export-reliant economies known as the “Asian Tigers” are often compared against one another.

Pan expects Taiwan’s economy to outperform the “Asian Tigers” by at least 1 percentage point a year in the near future due to inbound investments.

“Trade war is temporary, but the decoupling and the technology consideration is strategic and it’s going to be with us for decades,” he said.

Other than the U.S.-China trade war, the two’s technology battle means that the world’s largest economies will be seeing their supply chains move in separate directions — something that will benefit Taiwan, a major producer of technology products for the global market.

“It forces all our companies at least to shift parts or majority of high precision high-value technology back to Taiwan, while Taiwan companies still maintain a major presence in China,” said Pan.

Major Apple supplier Foxconn is a Taiwanese company, and the U.S. is one of Taiwan’s largest export markets.

As a result, hospitality companies like Pan’s will likely see more occupants who are business travelers heading to Taiwan, he said.

A similar spillover effect is also seen in the Taiwanese commercial real estate sector, CNBC reported in December.

With the economic separation of supply chains between the U.S. and China, “Taiwan, a bit like Hong Kong will become a more important part of the U.S.-China dialogue,” said Dane Chamorro, senior partner at Control Risks, a consultancy.

On Saturday, U.S. Secretary of State Mike Pompeo congratulated Tsai on her victory.

Tsai’s administration will need to continue manage and balance its relationships with the U.S. and China, said Chamorro. “Obviously, Taiwan relies a lot on the China economy; both sides rely on each other, so that will continue,” he said.

But Beijing on its part will continue to isolate Taiwan internationally, and continue to use influence operations against Taiwan, he added.

China claims Taiwan as its territory and says the island needs to be reunified with the mainland. Beijing has never renounced the use of force against Taiwan and has been using increasingly aggressive rhetoric toward the island.

“We fundamentally believe that before (Xi Jinping) steps down, whenever that is, he will have to have a plan, that will — a bit like what (former leader) Deng Xiaoping had with Hong Kong — in the future bring, in China’s opinion, Taiwan back into being part of China,” said Chamarro.

Hong Kong was a former British colony which sovereignty was transferred back to China in 1997.

China’s reaction

Beijing responded to results of the Taiwanese election in typical fashion, referring to the “Taiwan question” as “China’s internal affair.”

“The Taiwan question is China’s internal affair. Regardless of what happens in Taiwan, the basic facts won’t change: there is only one China in the world and Taiwan is part of China. The Chinese government’s position won’t change: we stick to the one-China principle and oppose “Taiwan independence”, “two Chinas” and “one China, one Taiwan,”said Geng Shuang, a Chinese foreign ministry spokesman in a statement issued on Sunday.

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