Taiwan Country Risk

Taiwan (TWN)

Taiwan’s overall country risk score of medium-low reflects economic strength and only moderate and intermittent tensions with China over reunification. The key uncertainty is Taiwan’s relationship with the new Trump administration, which will likely require Taiwan placing large orders for U.S. military hardware and increasing advanced semiconductor production in the U.S.  Even so, President Trump’s aversion to war will likely see less commitment to helping defend Taiwan than President Joe Biden, though China hawks will likely get Trump to keep the strategic ambiguity policy.  Meanwhile, China’s gray warfare has continued in 2024 with military aircraft intermittently flying close to Taiwan and China’s naval exercises.  China is unhappy with the new Taiwan president. However, the gray warfare has not escalated compared to recent years. China will also likely be pleased that a pro-China politician from Kuomintang, Han Kuo Yu, has been elected speaker of the Taiwan parliament earlier this year. Additionally, the parliament has passed a bill that requires the president to make regular reports to parliament, which is seen as a China-friendly policy. This could be a route to a more China-friendly view in some sections of Taiwanese society, which China would want to play out in the coming years and avoiding the alternative very high risk option of invasion. Thus, China will likely continue to pressure Taiwan but stop short of major escalation. Elsewhere, structural economic indicators remain strong helped by a well-balanced economy, controlled inflation and a huge current account surplus.  This leaves exchange transfer at a low rating, while the risk of doing business also remains at a low rating. Risk of sovereign non-payment is medium-low, which reflects the low government debt/GDP trajectory.