Taiwan Country Report 2018
Population : 23,550,000 (2017)
GDP : US$ 17,882 billion (2017, estimate)
GDP Growth: 2.58% (2017, estimate)
GDP – composition by sector: (2016, estimate)
Information Communication Technology Sector (“ICT” Sector), Plastics-Chemical, Machinery, Steel.
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Taiwan is a relatively stable and mature economy in East Asia. The GDP Growth Rate is usually below 3%, but the Inflation Rate is also low with Unemployment Rate mostly below 4%. The upside is that continuous trading surplus and current account surplus also accumulate a significant Foreign Exchange Reserve, which backs Taiwan’s economy and financial system as a buffer to several external shocks and crisis.
|GDP Growth (%)||4,02||0,72||1,50|
|Inflation Rate (%)||1,2||-0,31||1,4|
|Unemployment Rate (%)||3,96||3,78||3,92|
|Export (Goods & Service) (USD Billions)||372,0||340,1||333,6|
|Import (Goods & Service) (USD Billions)||317,2||272,4||269,6|
|International Trade Surplus (USD Billions)||54,8||67,7||64,0|
However, Taiwan is an “export-oriented” economy, which exposes Taiwan to the volatility in global market demand conditions and prices. Taiwan’s main exports include ICT” Sector and Plastics-Chemical sectors.
Regarding to Taiwan export destinations, below is the list of Taiwan’s top 15 trading partners that imported the most Taiwanese shipments during 2016. Also shown is each import country’s percentage of total Taiwanese exports. The export to both China and HK has already accounted for 40% of Taiwan total export value. The economic tie within Greater China Region is very obvious.
|Country||Trading amount||% of total Taiwanese exports|
|Hong Kong||$38.4 billion||13.7%|
|United States||$33.6 billion||12%|
|South Korea||$12.8 billion||4.6%|
|United Kingdom||$3.6 billion||1.3%|
From the below chart, you can clearly see the co-relationship between Net Export and GDP Growth, as well as the co-relationship between Taiwan and China (in 2015, China’s economic slowdown causes Taiwan’s Net Export, together with GDP, plunged).
Source: DBS Bank
Trade Credit Insurance Market
In Taiwan, the trade credit insurance market are dominated by the big 3 global players (Atradius, Coface, and Euler Hermes) with the total market share estimated to be 90%, and then followed by AIG. QBE is also in Taiwan market for around 11 years, but because of its changeable risk appetite, its market share is now minimum.
As mentioned earlier, even though the Trade Credit Policy in Taiwan can cover both Export and Domestic risks at the same time, but as Taiwan is an export-oriented economy, most of the Trade Credit insurances are for Export risk, especially to cover China risk, which is now Taiwan’s biggest export destination.
In addition to an export-oriented economy, Taiwan is also an over-banking market. There are totally 39 domestic banks and 29 foreign banks in Taiwan. Consequently, “Account Receivable Factoring” becomes a very popular banking business, by which Taiwanese exporters hedge the credit risk from the overseas buyers as well as speed up the DSO. Most of the factoring banks have their own master Factoring Trade Credit policy to cover the non-payment risk from the Factoring business. That is why you can see the premium of Bank Factoring Policy accounts for around 40% of the total annual Trade Credit premium in Taiwan.
|Corp. Policy ||$24,000,000||60%|
|Bank Factoring Policy||$16,000,000||40%
|Total Premium Size||$40,000,000||100%
As last, the insurance broker plays an important role in Taiwan non-life insurance market, Trade Credit Insurance is no exception. Generally speaking, the broker-driven business accounts for 85% of the total Trade Credit premium. The Taiwanese companies and banks reply on the professional trade credit broker with global network to supports their business development around the globe.
Prepared by ASTRA-Specialty | Astreos-Credit Taiwan