Taiwan governor says ‘no need to worry’ about capital outflows

Taiwan’s central bank governor downplayed concerns over capital outflows and potential foreign exchange volatility on August 3 amid increasing tension between China and the island.

“There is no need to worry,” Yang Chin-Long, governor of the Central Bank of the Republic of China, told media when asked about the state of foreign capital outflows. A visit to Taiwan by Nancy Pelosi, the US House of Representatives speaker, has infuriated China’s government, which claims sovereignty over the self-ruled island.

In a retaliatory move, China announced four days of live-fire military drills around Taiwan’s coast, starting today (August 4). Chinese customs have also banned imports of more than 100 food brands from Taiwan.

Yang said Taiwan’s foreign reserves could handle unexpected developments in the currency market. The country’s foreign reserves stood at US$548.96 billion by the end of June. The Taiwan dollar was staying around two-year lows of 30 to the dollar today.

The recent selling of shares by foreign institutional investors was “typical” for this time of the year, Yang said. He added that foreign portfolio managers tend to wire cash dividends abroad in August.

Taiwan’s finance minister Su Jain-rong said Taiwan’s financial markets may see fluctuations in the short term. But Su added that Taiwan authorities will closely monitor the situation, including capital outflows.

He also said the effects of China’s ban on imports of Taiwan’s food products would be “relatively small”. Su said Taiwan’s food sales to China were US$240 million in the first half year, or 0.1% of the island’s total exports for the period.