Bloomberg News

Taiwan President Names Government Veteran Chen His Premier

February 01, 2012

(Updates with Taiex close in fourth paragraph.)

Feb. 1 (Bloomberg) -- Taiwan President Ma Ying-jeou named Sean Chen as premier, choosing an official who oversaw the island’s markets during the 2008 financial crisis to revive growth in an economy expanding at the slowest pace in two years.

Chen announced later yesterday that Christina Liu, head of the Council for Economic Planning and Development, would be finance minister. The appointments were part of a leadership transition after Jan. 14 elections saw Ma win a second term and the ruling Kuomintang party keep its majority in parliament.

Appointing Chen suggests that Ma’s main priorities in his next four-year term will be restoring growth and helping Taiwan’s export-driven economy weather the global economic downturn, said Ellen Shen, a Taipei-based fund manager at Union Securities Investment Trust Co. Taiwan’s economy expanded 1.9 percent in the fourth quarter, the slowest pace since the third quarter of 2009, the statistics bureau said yesterday.

The Taiex Index gained 0.4 percent to close at 7,549.21 today, the highest since Nov. 9. The index has risen 6.3 percent since Taiwan’s Liberty Times reported on Jan. 16 that Ma may appoint Chen his premier.

“The global economic slowdown is the biggest challenge facing the new Cabinet,” Shen said. “Chen should be able to handle it, given his background in economy and finance.”

Slower Growth

The government’s challenges became clear after the statistics bureau released yesterday’s economic data, which showed the economy had entered a technical recession. The economy contracted 0.25 percent last quarter from the prior three months, shrinking for a second successive quarter, yesterday’s report showed.

The 1.9 percent growth rate for the last three months of 2011 was the slowest since a 1.41 percent contraction in the third quarter of 2009, according to data compiled by Bloomberg. The median estimate of nine economists in a Bloomberg News survey was for a 2.8 percent expansion.

Europe’s sovereign-debt crisis is hurting Asian exporters from Singapore to South Korea, and policy makers have either cut borrowing costs or refrained from further increases in recent meetings.

“Faltering external demand proved to be a considerable drag on investment, and hence GDP growth,” Raymond Yeung, a senior economist in Hong Kong at Australia & New Zealand Banking Group Ltd., said after the report. “But I don’t think the trend will continue in 2012. Political uncertainties have waned” after the Kuomintang’s re-election.

Victory Signal

Ma saw his victory as a signal that voters don’t want major policy or leadership changes in his second term, according to government spokesman Philip Yang.

“There’s continuity in the government,” Yang said. “Taiwan weathered the financial tsunami and Europe debt crisis better than a lot countries, recovering in a very short period of time.”

Chen has served as deputy finance minister and headed the Financial Supervisory Commission. Liu was chief economist at Chinatrust Financial Holding Co. before she became minister of the Council for Economic Planning and Development. She was also a member of the Cabinet’s tax reform committee between 2008 and 2009.

Chen also announced that Jiang Yi-Huah, the current interior minister, will be promoted to vice premier.

Campaign Promises

Ma won re-election after making campaign promises to push ahead with his policy of closer ties with China. He restored air, sea and postal links for the first time in six decades during his first term and signed trade agreements with the mainland.

The new parliament will take office today, while Ma and Vice President-elect Wu Den-yih, the outgoing premier, will take office on May 20.

Overseas sales, which are equivalent to about two-thirds of Taiwan’s economy, rose at the slowest pace in 26 months in December. Export orders, an indication of shipments in the next one to three months, fell last month for the first time since 2009 as demand from China and Japan declined.

Slowing overseas demand is already affecting Taiwan’s manufacturers and the nation’s job market.

HTC Corp., Asia’s second-largest smartphone maker, this month reported its first quarterly profit decline in two years. Nanya Technology Corp. and Inotera Memories Inc., Taiwan’s second- and third-largest memory-chip makers, reported their eighth quarter of losses as slowing demand for personal computers pushed down prices.

--With assistance from Adela Lin, Tim Culpan and Andrea Wong in Taipei. Editors: Nicholas Wadhams, Mark Williams

To contact the reporters on this story: Chinmei Sung in Taipei at csung4@bloomberg.net; Yu-Huay Sun in Taipei at ysun7@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net


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