Crisis Management for a Conflict with North Korea

Focus Taiwan | English | News | Nov. 25, 2025 | Geopolitical Conflict and Disputes

A recent article in The Economist claimed that Taiwan's central bank has purposely kept the Taiwan dollar undervalued, which the magazine argues has weakened purchasing power, driven up housing prices, and created financial risks. However, Taiwanese officials and academics have pushed back against this view, emphasizing that the analysis overlooks significant changes in Taiwan's industrial structure over the past few decades. National Development Council head Yeh Chun-hsien highlighted Taiwan's transition from traditional manufacturing to advanced sectors like semiconductors, reducing firms' vulnerability to exchange rate fluctuations.

Economics Minister Kung Ming-hsin attributed Taiwan's strong export performance to increased AI demand rather than currency manipulation, sharply dismissing The Economist's characterization. Historical disputes over the exchange rate include exporters like TSMC's Morris Chang calling for a weaker Taiwan dollar from 2008 to 2013 to boost competitiveness, while Central Bank Governor Perng Fai-nan maintained that exchange rates alone could not address export challenges.

Economist Chiou Jiunn-rong noted that Taiwan's central bank has generally aimed for a "dynamic balance," keeping the currency slightly weaker but avoiding heavy intervention. With TSMC now a global leader in advanced manufacturing, pressure for currency depreciation has lessened, and businesses prefer exchange rate stability. Taiwan faces complex challenges including U.S.-China tensions, trade protectionism, geopolitical risks, and the impact of carbon costs, making the previous low-cost export model unsustainable. U.S. scrutiny of currency manipulation also constrains Taiwan's policy options, potentially encouraging a shift toward more flexible and stable exchange rate practices.