Fitch: US surpasses China as Taiwan’s leading export market for 1st time in over 20 years
Date
8/15/2024 4:16:54 AM
(MENAFN) Fitch Ratings announced on Wednesday that the United States has surpassed mainland China as Taiwan's leading export market for the first time in over 20 years. This shift marks a significant change in Taiwan's trade dynamics, with exports to the US surging by 62 percent in July compared to the same period last year. This growth is primarily driven by the increasing global demand for advanced semiconductors and artificial intelligence (AI) technologies, which has led to a significant uptick in orders from Taiwan's technology sector.
The rating agency highlighted that major global tech companies have significantly increased their investments in advanced semiconductors and servers sourced from Taiwan as they work to develop and expand AI technologies and applications. This surge in demand is part of a broader recovery in the semiconductor industry, fueled by AI advancements. Additionally, Fitch noted that the trend of reshoring—bringing production back to domestic markets—will likely encourage further domestic investment in Taiwan's high-tech sectors.
Fitch is optimistic about Taiwan's economic prospects, projecting that the country's GDP growth will accelerate to 4 percent this year, up from 1.3 percent in the previous year. This positive outlook is largely attributed to the expected increase in high-tech exports, driven by the global AI boom. However, the agency also cautioned that Taiwan's economic growth could face challenges, particularly if there is a sharp slowdown in growth among its key trading partners, a decrease in global AI-related spending, or heightened geopolitical tensions. Additionally, uncertainty surrounding the United States' trade policies post-election could pose further risks.
Despite these potential challenges, Fitch affirmed Taiwan's long-term foreign currency issuer default rating at AA+ with a stable outlook. The agency emphasized that Taiwan's ratings are bolstered by several strengths, including its robust external financial position, prudent fiscal management, strong governance, and competitive business environment. However, these positive factors are counterbalanced by Taiwan's susceptibility to external demand shocks and the potential impact of abrupt changes in global trade policies, particularly those that could disrupt the technology sector and its supply chains.
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