Bangkok--17 Mar--Standard & Poor's
Closer relations with China have generated short-term gains for Taiwan's economy. But it will take a longer time to realize more substantial economic benefits that will increase credit support for the Taiwanese government. That's according to a recently published article by Standard & Poor's Ratings Services, titled: "For Taiwan, The Benefits Of Cross-Strait Rapprochement Will Take Time To Flow."
Relations between mainland China and Taiwan have warmed in the past two years since the Kuomingtang government took office. Benefits include a memorandum of understanding allowing more financial sector interactions, direct cargo shipments to mainland destinations, and a boost to tourism due to relaxed visitor restrictions and direct passenger flights.
"Investors' enthusiasm for improving relations is visible in the Taiwan stock market's rally of the past year. But relations are still far from normal, and it will take time before investors believe the recent changes are permanent and not prone to reversal under a new government," said Standard & Poor's credit analyst Kim Eng Tan.
Such confidence could emerge through stronger public appreciation of the benefits of closer economic ties, and regional trade and investment agreements that would make abrupt policy changes difficult. When this happens, businesses would be more likely to commit investments that could generate strong gains in employment and wages.
"Until then, the government probably won't push hard for tax hikes and subsidy reductions. We expect the government's debt level and off-budget liabilities to remain among the highest in the 'AA' rating category. These liabilities will remain important constraints on the ratings on Taiwan [AA-/Negative/A-1+] for some time to come." said Mr. Tan.
The report is available to RatingsDirect on the Global Credit Portal subscribers at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to
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