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Rising Government Bond Yields and Elevated AI Valuations Raise Financial Stability Concerns
Taiwan’s Two-Speed Economy: AI Exports Soar as Business Outlook Turns Cautious |
Expanding global demand for AI infrastructure continues to underpin growth in major economies. However, frequent military conflicts in the Middle East have heightened energy supply risks and pushed up oil prices, intensifying inflationary pressures. Rising government bond yields in major economies have further raised financing costs, which may dampen investment and consumption. The impact is likely to be more pronounced for economies that rely heavily on energy imports and have benefited less from technology-sector growth, adding to downside risks to global growth.
Domestically, manufacturers turned more optimistic about business conditions in September, supported by continued global AI infrastructure expansion, strong inventory buildup for new products by international brands, higher petrochemical and plastic and rubber feedstock prices driven by rising oil prices, and a recovery in production and sales as some firms completed scheduled maintenance. Looking ahead, the unresolved Middle East conflict and soaring memory chip costs, which may weigh on consumer electronics demand, have made firms more cautious about the six-month outlook than in the previous survey. ...Read more |
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| Pathways for Diffusing the Benefits of High-Growth Industries |
| During economic development, some industries often grow faster than others, creating imbalances. The appropriate response is not to impede their growth, but to accelerate and broaden the diffusion of their benefits to other sectors. One pathway is inter-industry linkages: as high-growth industries and their upstream and downstream partners expand, growth extends across the entire related cluster. With supply chain security now prioritized and countries seeking higher domestic content ratios, these linkage effects can be retained domestically. Factor prices, however, will face upward pressure, and the potential crowding-out of vulnerable industries warrants attention. A second pathway is technological diffusion. Given Taiwan's AI product attributes, the likelier direction is to leverage highly competitive industries' technologies and capabilities to develop equipment that enhances other industries' efficiency or product value. A third pathway works through higher factor demand and returns. Workforce training, however, must align closely with the overall industrial demand structure and target precise skill upgrading, to avoid aggravating imbalances in parts of the labor force. New investment by high-growth industries could also be directed toward regions with lower property prices, or a suitable share of the gains captured for the public, so that benefits reach more people. Another pathway is government and public investment participation; surplus municipal tax revenue, for example, could be invested through a sovereign wealth or national investment fund. Alternatively, capital from successful industries could be reinvested in other sectors, such as new industries, or the additional revenue could strengthen national defense or fund other public investment and government operations. Citizens can also be encouraged to spend more domestically, notably on high-quality consumption such as cultural, creative and arts activities. Unbalanced growth is inevitable, yet its benefits can be diffused to all. Rather than criticizing or even exaggerating the uneven distribution of its gains, we should focus on devising ways to spread them. |
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Taiwan Economic Research Monthly
APEC Roadmaps: New Business Opportunities in Regional Cooperation |
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Following the Putrajaya Vision 2040, APEC roadmaps, initiatives, and frameworks have translated the regional vision into policy across services, the digital economy, AI, health care, energy, and inclusive growth, shaping members’ reforms, industrial transformation, and cooperation. This issue examines how regional consensus becomes industrial application and how Taiwanese businesses can participate. We review the APEC Services Competitiveness Roadmap and how market opening, data governance, digital infrastructure, and talent development enhance competitiveness. Drawing on the AIDER roadmap, we analyze how interoperable e-documents, payments, customs, and regulations help firms expand overseas. APEC’s AI initiative extends cooperation to AI infrastructure, capacity building, and trustworthy governance, creating opportunities for SME digital transformation. Aging, care shortages, and AI power demand have made digital health and energy resilience regional priorities. Through Taiwan’s Long-Term Care 3.0, the APEC Future of Health Care Sub-Fund, and APEC energy cooperation, we show how policy needs link technology, pilots, and industry. We also explain how the La Serena Roadmap for Women and Inclusive Growth, talent development, and ESG’s social dimension connect to human capital and competitiveness. Finally, we assess business opportunities, challenges, and strategies.
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