Businessmen Request Central Bank to Curb N.T. Dollar Rise

Taipei, Jan. 10, 2006 (CENS)--The rapid appreciation of 2.8% of the New Taiwan dollar against the U.S. dollar in one week has eroded the profits of many exporters, sparking strong resentment among numerous exporters.

On Jan. 9, 16 textile industry associations jointly requested the Central Bank of China to curb the further appreciation of the N.T. dollar to help textile makers from plunging into even more serious business plight. Taipei Computer Association, Taiwan Electrical and Electronic Manufacturers' Association, the Medium- and Small-Sized Business Association, and Taiwan Association of Machinery Industry have also urged the government to prevent rapid revaluation of the local currency, which will deal a major blow to the export sector.

Huang Chung-jen, chairman of the Taipei Computer Association, noted that the large-scale rapid appreciation of the N.T. dollar has produced tremendous pressure on the operation of the exports-oriented electronics industry. Without timely response, electronics firms may suffer loss from the fluctuation of exchange rates. He estimated that the wave of N.T. dollar' s appreciation has created considerable pressure on the operation of the electronics industry.

Lo Hai-chia, deputy secretary general of Taiwan Electrical and Electronic Manufacturers' Industry Association, pointed out that the swings in the N.T. dollar' s exchange rate at the end of 2004 sparked an exodus among local notebook PC makers. A similar scenario may occur again, should the government fail to adopt proper countermeasures in time, warned Lo.

Officials at large forex-designated banks noted that gross profits of some notebook PC makers stand at only 5%, meaning the appreciation of the N.T. dollar in the past six trading sessions could erode half of their profits if no risk-hedging is adopted.

On Jan. 9, the exchange rate of the N.T. dollar broke the mark of US$1=NT$32, closing at US$1=NT$31.952, for an accumulated appreciation of 2.8% against the U.S. dollar so far this year or 4.7% over the past one month. The revaluation has wiped out the slim net profits of textile makers, which stand at only 1-2%. Textile makers are reluctant to raise their prices lest their orders should be lost.

Chen Chien-chu, chairman of Taiwan Silk & Filament Weaving Industrial Association, remarked that the continuous appreciation of the N.T. dollar is tantamount to a punishment to those makers which maintain their operations in Taiwan. Further appreciation of the local currency would force many textile makers to close shops, according to Chen.

Tai Sheng-tung, chairman of the Small and Medium Enterprise Association, echoed Chen' s urge, saying that otherwise exports-oriented small and medium enterprises may accelerate their exodus to China or Southeast Asia. He requested the CBC to intervene in the market timely, saying that it is exactly what most central banks have done frequently, despite their alleged adherence to the free-market principle.