The Economist diagnoses the "Taiwan Disease" as the New Taiwan Dollar being overly depreciated, not a disease but a financial defense?

The latest article in The Economist diagnoses Taiwan as having “Taiwan disease and the Shermosa flu”, but for Taiwan this is more like an economic defense strategy for survival. (Summary: Dividend of 20,000 to class 2.11% supplementary health insurance premium shouting card!) Taiwan's Executive Yuan: Suspend Response to Public Opinion, Reduce Generational Burden) (Background addition: Here it comes!) Huida Taiwan headquarters confirmed to settle in Beishike T17, T18, Jiang Wan'an: the fastest start of administrative procedures ) Recently, the cover story of The Economist put a very sharp name on Taiwan's economy, “Taiwan disease” and “Formosa flu”(Formosa flu). This report directly dissects Taiwan's export data, showing that an economy driven by AI and semiconductors and with the world's top export performance has been suppressed for a long time (the New Taiwan dollar) at an extremely undervalued level. The outdated model of “sacrificing internal purchasing power in exchange for export competitiveness” is putting “alarming pressure” on Taiwan's internal economy. This diagnostic report instantly ignited the collective anxiety of Taiwanese society, and it touched the soul of every young person living in Liudu, sighing at unattainable housing prices, or looking at their own stagnant salary bills for more than a decade. Is the Taiwan disease really a “disease”? Or the “armor” that Taiwan had to put on? The Economist's prescription to “let the new Taiwan dollar appreciate” sounds logical, but I think it may not only cure the disease, but may even cause Taiwan to go into shock. When the tech industry is making money, why is Taiwanese's wallet shrinking? Before we can refute The Economist's prescription, we must admit that its diagnosis is extremely accurate. The “Taiwan paradox” it depicts is a real objective fact. Taiwan is a “semiconductor warship” with powerful firepower, and the semiconductor and AI industries led by TSMC are amazingly powerful. Over the past five years, the AI wave has tripled chip and server exports. In October 2025 alone, the annual growth rate of AI server exports reached a staggering 202.2%. This warship continues to blast out beautiful trade surpluses, earning back a lot of dollars, so that our current account surplus soars to 16% of GDP, a figure that even Germany, the king of industry, can match. The paradox lies in the hub of the warship, Taiwan's central bank (CBC), which has long depressed the exchange rate of the new Taiwan dollar. According to the “Big Mack Index”, the new Taiwan dollar may even be the most undervalued currency in the world, artificially “discounting” our main artillery ammunition to make it appear cheaper and more lethal in the international market. This strategy brings three symptoms of what The Economist calls “amazing stress”: 1. The weak Taiwan dollar makes it more expensive for us to buy imported goods (especially energy and food). This is tantamount to imposing a “hidden tax” on the whole people, and the tax revenue is used to subsidize the export manufacturers. That's why, in the past two decades, Taiwan's labor productivity has doubled, but our real wages seem to be nailed in place. 2. Unaffordable houses: To stop the appreciation of the new Taiwan dollar, the central bank must constantly print money and buy back the dollars they earn from exporters. These cheap money, which was printed and had nowhere to go, flooded into the market. The house price is sky, Taipei City's 16 times the house price income ratio, so that the floor under our feet is more expensive than London and New York. Extended reading: South Korea offers a “ruinous house” high-priced home loan amount of less than 10%, should Taiwan learn? 3. The financial bomb that shakes the national capital: In a long-term low-interest rate environment, Taiwan's life insurers are forced to invest trillions of Taiwan dollar premiums into overseas US dollar assets with higher yields in order to pay policyholders' high-interest policies. This creates a huge “currency mismatch”, with life insurance companies holding US dollar assets but saddled with Taiwanese dollar liabilities. It is estimated that this unsafeguarded dollar risk is as high as $200 billion, equivalent to 25% of Taiwan's GDP. Weak currency is Taiwan's economic defense After acknowledging the truth of all the above symptoms, The Economist concludes that Taiwan is sick and should take medicine, and the prescription is to follow Singapore's example and put the new Taiwan dollar on a mild, gradual appreciation path. This advice is perfect in the “vacuum laboratory” of economics, but it is cruel in geopolitics and global supply chains, and treatment may equal death. I believe that the “Taiwan disease” mentioned by The Economist is not a disease, but a “second-best” rational choice that Taiwan, a specialized economy, can make in the gap between global competition and geopolitics. Let's raise the perspective, what are the most fundamental national-level issues for Taiwan's policymakers? Is it “how to bring house prices down”? It's not huh, it's how to “survive” in a political, highly competitive global environment. Taiwan's economic lifeline is highly concentrated in the electronics export industry, which is characterized by extremely capital-intensive, ultra-fast technological iteration and extremely brutal global competition. TSMC's lead is often measured in nanometers; MediaTek's market share may decline due to a quarterly mistake. More importantly, there is a “red supply chain” on the other side of the strait that has the power of the whole country and huge subsidies. In this context, maintaining export competitiveness is not just a straight-line option, but a strategic issue of “economic defense”. A weak exchange rate is the most basic and effective line of defense in this defense system. It provides a crucial profit cushion for all of Taiwan's export industries. The next generation of R&D investment has the capital to fight a price war, so that Taiwan's technology industry has the underlying support to fight with the rivals of Japan and South Korea. What would happen if we really followed the advice and let the new Taiwan dollar appreciate significantly? Imagine the new Taiwan dollar coming to the world of NT$20 to 1 US dollar. How big an impact will this be on the gross profit margin of TSMC, Hon Hai and thousands of small and medium-sized enterprises downstream? At that time, Japan, it was after the Plaza Accord in 1985 that the yen was forced to appreciate sharply and fell into the “lost decades”, Taiwan's economic structure was far more dependent on a single industry than Japan at that time, so it could not afford this shock therapy. Therefore, the painful internal pressures of high housing prices and stagnant wages may be reinterpreted as internal costs shared by society as a whole to maintain the global competitiveness of state-level strategic industries. The problem is distribution, why take the exchange rate? The Economist may not only have miscalculated the side effects of treatment, but may even have “misdiagnosed.” Is the core contradiction of Taiwan's economy really the depressed exchange rate? I think the real problem is the mechanism of wealth distribution. The exchange rate is a general indiscriminate weapon of attack. Letting the new Taiwan dollar appreciate is like dropping a carpet bomb and blowing up AI giants that can make super profits, but it will also blow up those traditional industries, textile industries, and tool factories that are still struggling. These industries may not have a glamorous technological aura, but they provide a large number of basic employment opportunities in Taiwan. I couldn't squeeze into the technology industry before, and now I have to lose my job and let 99 ordinary people follow the funeral, will this be a good strategy? The essence of the problem is not that Taiwan “did not earn enough”, but that the money earned “was not shared fairly.” Contradictions arise when the vast majority of the huge profits from AI server exports go to the pockets of shareholders, foreign capital, and senior managers of a few companies, and fail to effectively translate into the well-being of the whole people through salary increases or taxes. The data supports that corporate earnings as a percentage of GDP continue to reach new highs, while labor compensation as a percentage of GDP has been declining for a long time. What we see is that the average salary is being pulled up by a few very high salaries, but the median salary of the vast majority is unchanged, which clearly points to a structural problem of distribution failure. Distribute the disease, but prescribe …