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Magnitude and volatility of Taiwan's net foreign assets against Mainland China: 1981–2009

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  • Yeh, Kuo-chun
  • Ho, Tai-kuang

Abstract

The ongoing private capital inflows from Taiwan to China is a steady concern for Taiwan's policymakers. According to the official data, Taiwan's private enterprises have cumulatively invested about US$ 150–280billion in China since 1987. However, the figures are widely perceived to be an underestimation and there exists a huge gap even between the estimations conducted by different government departments. The purpose of this paper is to re-estimate Taiwan's net foreign assets (NFA) against China, revising the so-called “dark matter” hypothesis proposed by Hausman and Sturzenegger (2006, 2007). In contrast to the current statistics being limited to registered direct investment or census investigation, the advantage of our model is that direct investment, portfolio investment, and the possible knowledge and property spillovers are included. We show that changes in Taiwan's NFA against China over GDP are negative in economic and political turmoil, such as the missile crisis in 1995, Asian financial crises in 1997–98, and global tsunami in 2007–09. From 2000, the growth rates we simulate are never lower than the official data till 2009. We also suggest some possible economic causes that lead to the huge Taiwan's NFA against China.

Suggested Citation

  • Yeh, Kuo-chun & Ho, Tai-kuang, 2012. "Magnitude and volatility of Taiwan's net foreign assets against Mainland China: 1981–2009," China Economic Review, Elsevier, vol. 23(3), pages 720-728.
    • Handle: RePEc:eee:chieco:v:23:y:2012:i:3:p:720-728
    DOI: 10.1016/j.chieco.2012.03.012
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    References listed on IDEAS

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    Cited by:

    1. Bi-Huei Tsai, 2017. "Predicting the competitive relationships of industrial production between Taiwan and China using Lotka–Volterra model," Applied Economics, Taylor & Francis Journals, vol. 49(25), pages 2428-2442, May.

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    More about this item

    Keywords

    Taiwan's NFA against China; Revised dark matter hypothesis;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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