Bank Plays Crucial Role in Taiwan’s Economic Success
Taipei, Taiwan - The Taiwan Central Bank has been instrumental in guiding the country’s economy towards rapid growth and stable prices over the past four decades.
A Record of Success
According to a recent report, Taiwan’s economy has expanded at an annual rate of 8.9%, while consumer prices have risen by 3.2% per annum. This remarkable “Taiwan Success Story” is attributed to the bank’s efforts in fostering conditions conducive to long-term economic growth.
Historical Context
In the 1960s, Taiwan’s economy was primarily agricultural-based, and the bank had to rely on interest rate controls and foreign exchange controls to mobilize capital and foreign exchange reserves for national development. However, with the establishment of the money market in 1976, the bank began to phase out interest rate controls, gradually shifting towards a market-driven mechanism.
Promoting Financial Liberalization and Internationalization
The bank also played a crucial role in promoting financial liberalization and internationalization. In 1987, all foreign exchange controls on trade-related current account transactions were abolished, followed by the removal of remaining restrictions on exchange rate movements in 1990.
Navigating Challenges
Despite facing challenges such as the 1997 Asian Financial Crisis, Taiwan was able to escape unscathed due to sound economic fundamentals and proper sequencing in financial deregulation and capital account liberalization. The bank’s swift response to natural disasters, including a NT$100 billion allocation for subsidized housing loans following the 1999 earthquake, has also helped mitigate the impact of crises.
Recent Challenges and Responses
In recent years, the global economic downturn has affected Taiwan’s economy, prompting the bank to take measures to shore up the domestic economy. These steps include:
- Lowering the discount rate
- Promoting preferential housing loans
- Supporting traditional industries
The bank is also focused on promoting adjustable rate mortgages and flexible prime rates to improve the competitiveness of the financial sector. In 2002, it encouraged banks to introduce these new products, which are automatically adjusted according to benchmark market interest rates, making pricing more market-sensitive and transparent.
Looking Ahead
Looking ahead, the bank recognizes that globalization and technological progress have reshaped the international financial landscape. As a result, the bank must adapt to these changes while maintaining its commitment to price and financial stability, as well as fostering sustainable and equitable economic growth in Taiwan.
“We are committed to navigating the complexities of globalization and technological progress to ensure the best interests of our nation,” said a spokesperson for the bank. “The Bank will continue to carry out its mission of maintaining price and financial stability and fostering sustainable and equitable economic growth in Taiwan.”