August 2021  
The spread of Delta variant could hinder the global economic recovery
TIER’s manufacturing and service composite indicators declined in July
The spread of Delta virus variant seems inevitable, and the new form of pandemic could as an unwanted result hinder the global economic recovery, as confirmed cases have been in a rise almost everywhere. In response, Asia Pacific Economic Cooperation (APEC) member economies have recently developed a comprehensive 10-year strategy in a bid to support the region’s routine vaccination effort and enhance the resilience and sustainability of immunization programs in the region through 2030. Despite that, the economic conditions in the near term are still very uncertain. Nevertheless, the market demand for end products, namely the US and European markets, nowadays remain strong because of lockdown lifting. The Taiwan Institute of Economic Research (TIER) issued its business composite indicators in July. Both the manufacturing sector and service sector composite indicators declined; however, the construction sector composite indicator increased for the first time after months of weakening. ...Read more
Ratings agency warns of debt-for-dividends risks
Taiwan’s financial holding companies are taking on debt to answer demand from shareholders for greater dividends, which increases financial risk and can harm long-term credit strength if there is no liquidity risk management, Taiwan Ratings said on 24th August 2021. Shareholders in Taiwan have been vocal about wanting greater yields and local financial conglomerates have issued more debt to satisfy the requests, as internal dividend sourcing from subsidiaries has waned in the past few years, the local arm of S&P Global Ratings said. The situation has arisen partly because regulations in Taiwan bar financial holding companies from generating cash from their own business operations, However, the shareholder-friendly strategy would increase liquidity risks for financial groups in the long run, especially if they face massive debt maturities and other financial obligations amid unfavorable changes in market liquidity. Dividend income from subsidiaries has softened in the past few years due to tighter regulatory requirements on capital retention and constraints on how much money subsidiaries can upstream to parent organizations. The dividend payout ratios of Taiwan’s financial holding companies have climbed, averaging at 50 percent in 2019 and last year, much higher than the benchmark of 30 to 40 percent for the top 10 US bank holding companies in the same period, Taiwan Ratings said. As debt ratios rise, adequate liquidity risk management becomes more important for holding companies. (Source: Taipei Times).

Taiwan and Arizona Forge Partnership in Pursuit of New Business Opportunities (Source: MOEA).
Taiwan, Paraguay central banks ink cooperative pact (Source: Focus Taiwan).
Taiwan Economic Research Monthly
Smart innovation strategies for small and medium-sized enterprises in the pandemic era
In the face of epidemic-related control measures and changes in consumption patterns, small and medium-sized enterprises such as wholesale and retail, life services, logistics and distribution, and leisure and entertainment have derived new services such as zero-touch, cloud services and computing, and e-commerce. In view of the fact that small and medium-sized enterprises still face changes in corporate culture and thinking, the use of data, the promotion of cooperation between enterprises, and the transformation of goods and services in the promotion of smart innovation would be crucial. We referred to small and medium-sized enterprises in Japan, South Korea, and Taiwan as case studies. Studies showed that AI technology, digital tools, and data digitization are used to improve the manpower requirements of the production process under the epidemic, and strengthen the operational flexibility in response to changes in the demand side.
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