Photo taken on July 21, 2019 from Xiangshan Mountain shows the Taipei 101 skyscraper in Taipei, southeast China's Taiwan. Photo: Xinhua

Taiwan's economy will be further impacted due to the geo-political tension provoked by the US and the Democratic Progressive Party (DPP) authorities' secessionist policy to unwisely undermine the island's trade ties with the Chinese mainland, said analysts on Tuesday, as the latest data showed that the island's export orders saw a surprise decline in July.

Experts said that due to the hostile policy held by the DPP authorities and the uncertainty brought by the US interruptions to China's reunification efforts, the Chinese mainland will also work to reduce dependency on Taiwan in the fields where the island has advantages, such as electronic products, so the mainland can avoid potential risks in the future since the DPP authorities will serve the US strategy to contain and damage the mainland's economic development.

The Taiwan authorities are trying to blame the mainland for the island's current economic problems to legitimize their attempt to decouple with the mainland market and try to boost economic ties with the US to reduce the losses of its secessionist policy that ruined the cross-Straits economic ties. Analysts said the DPP should look in the mirror and blame itself for the worsening economic situation and at the US, which is adding fuel to the flames to keep the regional tension from easing.  

Surprise decline

According to Bloomberg on Monday, Taiwan's export orders unexpectedly contracted in July as "demand from Chinese [mainland] customers plunged," and the relevant authorities on the island are now warning of "further declines to come." 

Orders slumped 1.9 percent in July compared to the same month last year, Bloomberg's report said, citing a Monday statement from the economic authority of the island. That was worse than even the most bearish forecast in a Bloomberg survey of economists. The median estimate was for a 6.2 percent increase, according to the report. 

A 22.6 percent decline in orders from the Chinese mainland and Hong Kong was the main driver of the surprise fall, as the data released by the authority shows a 6.9 percent increase in orders from the US was insufficient to offset the difference, Bloomberg reported.  

Orders declined across major product categories, with the exception of electronic products, which include semiconductors. The outlook signals the likely end of close to two years of strong expansion in overseas orders. Export orders picked up in May and June after another shock fall in April, but the authority said Monday that it expects orders to fall again in August between 0.9 percent and 3.7 percent, according to the report. 

Li Fei, a professor from the Taiwan Research Institute at Xiamen University, told the Global Times on Tuesday that "whether for exports or imports, the island's economy is deeply reliant on the mainland, especially exports. From agricultural products to high-tech industries, Taiwan's economy can't change its dependency on the mainland market."

Unfortunately, the DPP is now seeking support from the US to realize its secessionist purpose, so it is trying to decouple from the mainland market, which is wishful thinking, and it is seeking to please the US by joining the US-led Indo-Pacific Economic Framework (IPEF) as a "semi-member," while staying away from the Regional Comprehensive Economic Partnership (RCEP) which includes China, ASEAN and most regional major economies, Li said. 

"In other words, the DPP is not just fighting the mainland, it's fighting against the law of economics and markets, and this is weakening Taiwan's advantages. Decoupling with the mainland is a 'slow suicide' for Taiwan's economy," Li noted. 

A key reason why Taiwan's economy can withstand the challenge from the COVID-19 pandemic in recent years is that its chip exports to the mainland boosted the recovery for the economies on both sides of the Taiwan Straits, but if the DPP still wants to replace the mainland market with the US one, then it will see negative impacts gradually in the future, analysts said. 

The drop in Taiwan's export orders to the Chinese mainland may suggest that Taiwan's products are not as competitive as before in the mainland market, and the mainland could find replacements easily elsewhere, Chang Ya-chung, president of the Sun Yat-sen School in Taiwan and a member of Taiwan's major opposition party KMT, told the Global Times on Tuesday.

"The mainland has developed very fast in recent years, and it won't take long for the mainland to form a complete industrial chain of its own. Therefore, countries or regions would consider whether their products are difficult to be replaced before exporting to the mainland in the future," Chang said. 

Although in July there was no direct political event to trigger a continued antagonizing atmosphere and city lockdown due to a surge of epidemic that affects production happened in April and May, experts said the decline of orders and even economic dependence in July signals a negative prediction of businesspeople toward cross-Straits prospects.

July, which was relatively calm, may be a buffer period for all aspects, but the background is inseparable from the tension between China and the US and in the Taiwan Straits, and many Taiwan businesspeople do worry that "something could happen" in the future, Chang said.

Chang said "Taiwan's export orders' decline will be the trend in the future. The advantages of most Taiwan products are also fading."

DPP's political gambit 

The dive in cross-Straits trade is in stark contrast to last year's, when Taiwan's exports to the Chinese mainland and Hong Kong gained 24.8 percent on a yearly basis, observers said, noting that the plunge mirrors that the DPP is playing a political gambit of pushing decoupling from the mainland to "curry favor from" the US, which is doomed to inflict self-caused harm on its economy at the cost of sacrificing the interests of Taiwan people and enterprises.

"There are multiple reasons behind the drop, including a higher base last year and supply chain relocation to the Southeast Asian region. The uncertainties in the global situation also weigh in," Wang Jianmin, a senior cross-Straits expert at Minnan Normal University, told the Global Times on Tuesday. 

Analysts noted that the July decrease came against the backdrop of escalating tensions in the Taiwan Straits, yet the effect of the mainland's punitive measures against Taiwan secessionists had not manifested. And taking account of US House Speaker Nancy Pelosi's visit in early August and other global political factors, the decrease would continue in the next few months.

Chinese mainland customs in August announced the suspension of imports of citrus fruits and some frozen fish from Taiwan island. The trade volume of the agricultural and fishing products only accounts for a small portion of total trade, but such punishment serves as a stern warning to "Taiwan independence" separatist forces. 

"This is ironic. The DPP - in disregard of the mainland being the island's biggest trading partner - attempts to wean its bilateral economic ties from the mainland and collude with external forces in the name of trade cooperation," Wang said, exemplified by the island's joining of the US' small clique to contain the development of the Chinese mainland, including the US-led so-called 'Chip 4' alliance and negotiations on a so-called trade initiative between the US and the island of Taiwan.

Exports account for over 70 percent of the island's GDP, and its exports to the Chinese mainland represented over 40 percent of its total exports last year, customs data showed. The mainland also accounts for over 60 percent of Taiwan's semiconductor and computer equipment exports, analysts estimated. 

Analysts warned that the DPP's collusion with the US is putting its semiconductor, or the pillar industry of the island on which the economy relies heavily, at risk. 

"On the one hand, the US does not seek genuine cooperation with the island, but only to render further concessions from Taiwan enterprises in giving away their core technologies. On the other hand, geopolitical factors could lead to fluctuations in demand for high-tech products, and this will also take a bite out of the profitability of local firms," Wang said. 

Xue Deqing, a Taiwan-based businessman who has been investing in Fujian's Pingtan county for over a decade, told the Global Times that the economy of the Taiwan island has been sluggish amid a new cluster of coronavirus outbreak and the global economic downturn. 

"Taiwan society is in distress, and is disappointed at the DPP authorities. But rather than taking responsibility, the DPP has been hyping 'economic coercion' by the Chinese mainland as the root cause. But would anyone with a logical mindset buy into such excuse?" Xue said.

Zhu Haoning also contributed to the story